Cash out ReFI vs. HELOC or Home Equity Loan

[Abhilash Joseph]

BP mates,

I have about 45K Princ. balance on my rental investment  (appraised to ~ 140K) ; it was @ 5.25% for 15 yrs. Now, I am almost ready to lock a 4.625% for another 30 yrs to get some cash out for another property investment. Few BP mates recommended the longest term is preferable over the rates, since the tenant is paying it which I agree as well. SO decided on 30 vs. 15 years. Before I dive in deep, one last quick check to get any other feedback...

I should have another 50k to invest if this goes thru....

[Aleks Gifford]

Legal stuff first: I am a licensed Sr. Loan Originator NMLS# 1157855 and am currently licensed to originate in IN, OH, FL. If you are not in those states what I say may or may not apply to you. Please consult an advisor in your state. That being said the question is not so much term and rate but how long will you hold the property? If you are keeping it just a few years than your costs are much lower on a 30yr however if plan on keeping it for a very long time consider the short term as your cost is lower. Saying it does not matter because the tenant is paying it is bs and why non lenders should not advise on lending matters. You are paying it in cash flow and/or reserves if you loose your tenant and have a period of time with no rent. Your credit is paying it in your DTI. You are paying it in other deals when you are not liquid enough to get in on that homerun. You need to do a Total of Payment Calculation for both terms and rates and compare it to your strategy about holding the property. Further more you need to consider your tax advantages as well as your cash flow and investing needs.

General rule of thumb is short term holdings go long term loans. Long term holdings go short term loans. Reason being is cash flow and speed of return to being able to build equity to refinance down the road.