HELOC vs a Cash-Out refi .... Pros and Cons of each ??

[Michael Dunn]

Hi,

I need some help in figuring out what my best course of action will be , given the following situation.....

I am looking to Get the Equity out of my Primary come the first of July ( about 3 - 4 weeks from now ).

I have right at $40,000 of Equity in the property.

A Lender told me that I can get up to 100% of the Equity out of the house via a VA loan

So given the 100% of Equity with a VA loan Refi . , would a HELOC even be something I should consider ?

Here is what my goal is, with the use of the $40,000 of Equity :

I am looking to purchase a property for around $45,000 + $5,000 ( for two sets of Closing as well as the Appraisal ) = $50,000 Loan I'll get from the Lender

$10,000 Down Payment ( 20% of the $50,000 loan ) + $25,000 in Rehab costs = $35,000 ..... Which I'd get the money to pay for this $35,000 via the cash I get ( $40,000 ) from the Refi. or HELOC .

This assumes the ARV comes in at $100,000 ( although likely $110,000 ), with an LTV for a Loan on the next Investment/Rental property being 75% = $75,000

So $75,000 from the LTV - $50,000 ( the amount my Loan will be from the Lender ) = $25,000 to use on the next Investment/Rental property purchase .... Wash, rinse, repeat

Thanks so much for any and all help 

[Jason Chambers]

We went the HELOC route and it's been great for us. You really can't beat simple interest especially when you can get locked in to a great introductory rate. Even if you can't negotiate a fixed rate HELOC (we were able to) the variable interest rate is peanuts compared to the compound interest you would otherwise pay on a mortgage. Of course, the numbers have be right to be eligible for a HELOC (equity vs LTV) but it's been one the best financial decisions we've made. A HELOC on one house has allowed us to buy 3 others. Another way we've managed our HELOC is to deposit all of our income back into it every month and aligning all our bills to be paid at the beginning of the month. The idea is to avoid as much interest as possible while paying down large chunks of the debt. At 1.75% simple interest we managed to get, we're killing it! And as you pay it down you still have access to it to continue to invest. Just be careful not to spread yourself too thin or max it out and you're golden!