Should I get a HELOC to buy rental properties?

[David Kuhlke]

Hello BP, 

I currently owe $300K on my mortgage and the value of my home is $400K. My current mortgage interest is 3.375%. 

The loan company I'm working with will offer a total of 95% LTV (combined mortgage and HELOC), but the catch is that they want to charge me 5.75% interest on the first mortgage. However, I would then have an $80K HELOC to play with.

Is it worth it to lose out on the 3.375% interest in order to do this HELOC deal? The lender said I can refinance after 6 months to market interest rate.

Thanks, 

David

[Craig Jeppesen]

You don’t have enough equity to really do a heloc, only $20k. I would hold off and definitely would not refinance your first at so high a rate or risk your small amount of equity. Generally helocs are good for short term financing like repairs on a brrr before you refinance it. I would not use a heloc for long term financing of rentals. If you want to jump in down grade your $400k house.