Should I use HELOC now?

[Lisa L.]

I’m under contract with an off-market deal which will close in 2 weeks. The price is $230K and it’s a cash purchase. After purchase rehab cost is about $15K.

I have enough cash in savings or I can use a HELOC to purchase it.

1. Use cash to purchase and then do a cash out refinance. Cash out refi rate is almost 8% now. But I'm a little worried that the bank can cancel the HELOC zig the market gets worse like I have read on BP.

2. Use the HELOC to purchase. The rate is prime rate +0.1. So today's rate will be 7.85%. The payment will be interest only. After paying interest, property tax and insurance, there will be about $500 leftover from monthly rent. I can used the $500 to pay towards the principal. This way, I can save the cash in my savings for the next deal. Also in the future if the mortgage rate declines, I can refinance and payoff the HELOC.

Which option is more wise? Can the bank cancel my HELOC after I've used it?