Cash Out Refi vs HELOC

[Alex Schredl]

Hello all,

I am trying to figure out what makes more sense for me in my current situation. 

My current 30-year fixed mortgage on my primary residence is about $2k a month.

I want to refinance to get a lower rate in the coming weeks since the bonds have bottomed out. What I am trying to figure out now though is, would it make more sense to cash out while doing the refinance or refinance and have a lower payment and open a HELOC or last option, do both. With the cash out option I can pull out about $60k without negatively affected the rate. I also understand that the HELOC is a variable rate while the cash out option would be locked in with a fixed mortgage.

Just trying to figure out how to get some financial leverage to jump into the real estate market that makes the most sense in the long run.

And my apologies if this is a stupid question.

[Daniel Z Fang]

Originally posted by @Alex Schredl:

Hello all,

I am trying to figure out what makes more sense for me in my current situation. 

My current 30-year fixed mortgage on my primary residence is about $2k a month.

I want to refinance to get a lower rate in the coming weeks since the bonds have bottomed out. What I am trying to figure out now though is, would it make more sense to cash out while doing the refinance or refinance and have a lower payment and open a HELOC or last option, do both. With the cash out option I can pull out about $60k without negatively affected the rate. I also understand that the HELOC is a variable rate while the cash out option would be locked in with a fixed mortgage.

Just trying to figure out how to get some financial leverage to jump into the real estate market that makes the most sense in the long run.

And my apologies if this is a stupid question.

Hi Alex - both are viable options. Cash out refi means locking in the rate and making payments now while a heloc has variable interest rate as revolving credit which you can draw on as needed. It depends on what you’re needing that money for. Personally I view heloc as a short term option given uncertainty with long term rates so I would only use in place of a short term loan. For a down payment in a buy and hold situation, cash out refi feels more predictable. I would suggest focusing first on the details of the deal. Once you know what you want to buy, you can look at both options to figure out how best to finance it.