HELOC vs HE Loan vs Cash-Out Refi

[Daniel J Jackson]

BP community!

Reaching out with a question about best options for financing.  

Working to find a house-hack duplex in Austin, TX and planning to go conventional with 15% down.  I am considering leveraging our primary home to do so.  It is currently on a 15 year note and if I have about $45,000 in equity sitting in it.  What are the pros and cons of each of the below three methods for accessing this?

1. Cash out Refinance: 

PRO: Keeps everything together (HELOC and HEL create a 2nd lien)

CON: Starts a new loan, so has closing costs and you go back to the beginning of the amortization table, so more money to the bank.

2. HELOC

PRO: Low monthly payments.  Avoid closing costs. Keep my current 1st loan on 15 year term chugging along.

CON: Might take a long time to pay it back and unless the duplex can later be refinanced at a higher value, it will be harder to put this money back.

3. HE Loan

PRO: Fixed term and interest rate.  Avoid closing costs. Keep my current 1st loan on 15 year term chugging along.

CON:  Creates a 2nd lien with a higher payment, so always risky if payment gets tough.

Open to your feedback.

Thanks!

Daniel