Should we stay with the HELOC or do a cash out refi???

[Jim Morris]

Greetings Team,

Trying to figure out what to do here... House "a", used to be our primary residence, when we lived there we took out a HELOC against it. It is paid for so the HELOC amount we had access to is/was pretty high. Soon after we had the HELOC secured, another house came up for sale really close to house "a", and we bought it with a decent chunk of the HELOC from house "a". We moved into house "b" and rented out house "a". House "b" is smaller and overall cheaper to operate, as such, the rent from house "a" more than covers the overhead. It rents very well actually.

Here's the rub, the introductory rate on the HELOC has since passed and the "honeymoon" phase of the HELOC is over and we're really not loving the interest only note with an increasing interest rate. We knew this could happen, but figured we'd just deal with it when the time came... and here we are.

So... We can do a cash out refi, buy down 1/4 point and get most of the loan down to 4% fixed. BUT, then I'm of course paying closing costs and who loves that? It'll take about a year to repay the fees from the lower interest rate. Or do I just suck it up, and throw everything we got at the HELOC. With two other rentals kicking in plus day jobs we can comfortably throw 4 to 5k per month at the note, and we could even dig into savings and put a modest dent in the HELOC too.

If we refi'd we would have the HELOC freed up to purchase another rental should something pop up so I do like the flexibility in that regard.

You don't have to dig into the world wide interwebs very hard to find all sorts of thoughts on mortgage acceleration products, you know, the ones where you have a 1st lien HELOC or even a 2nd lien HELOC and start "chunking" your income in an attempt to get your note chewed down quicker. By default we already have a 1st lien position...

Anybody got other ideas or options I haven't considered here. I'm sure I'm not the only one to put themselves in this position.

Go!