HELOC for down payment then refinance? Or Sit still?

[Eddie L.]

My family and I live in our primary home in San Francisco bay area that we bought many years ago. It is valued at roughly $1.5M and we owe about $350k on it. I was considering tapping into the equity to put a down payment on a second home within the next 6 months. I spoke with a lender and she suggested a cash-out refinance. We could get ~ $700k at 4%, which I would then pay off the $350k balance and have $350k for a down payment. We would then rent out the new place (or even move in later on).

The main issue is we are not ready to buy yet. The inventory isn't that great right now. I would hate to take the cash-out refinance now and pay the higher monthly payments for ~ 6 months until we find a new house we like. Would a HELOC be smart at this point? Get the cash out and when we are ready, we can start this process? And when we get the 2nd home we can refinance the HELOC and get a fixed rate?

Sorry if I make no sense as I am really new to this. The bankers are pushy and do not seem to answer all my questions. She said if I do not take our the cash-out refinance now, the banks will stop doing them soon due to COVID, which I get.

I forgot to mention: I do not need to do anything and just live out our years with a low monthly mortgage. I know times are weird right now and who knows what the economy will look like in 6 months or a year. I can play it safe and just wait it out. 

[John Warren]

@Eddie L. I think the HELOC is the perfect solution for your situation. You don't want to do a cash out because it might be six months or a year before you deploy the capital. I love the HELOC for this situation as it gives you dry powder. The banker you were referring to is not looking out for your best interest. Many lenders cannot do both a cash out refinance and a HELOC. The primary lender I use for residential financing here in Chicago does not do HELOCs. At the same time, he always has been able to refer me to another lender to help me get a great HELOC when I need one. I think you should be looking for a better ally on the lending front.