Refi: 15yr vs 30yr; Cash vs HELOC

[Aaron Akins]

Hello All!

I'm needing some advice and I'm hoping to get several opinions/points of view with respect to 15yr vs 30yr and cash out refi vs HELOC on my primary residence and a decision that I'm trying to make which all ties in to my goal of investing in my first rental property.

Here are my numbers for my primary residence:

Purchase Price: $212,000 (2010 purchase)

Amount Owed: $284,898 (2019 cash out refi to pay of student debt and extra for investments)

Current Loan term length: 15 years (2020 refi to decrease interest rate)

Current interest rate: 2.375%

Estimated Home Value: $650,000+ (realtor suggested listing for $815,000)

Monthly P&I Payment: $1946

Current cash on hand for investment: $120,000

My consideration: I’m considering refinancing to a 30 year mortgage and doing a cash out that will bring my new monthly payment equal to that of my current monthly P&I. Here is what that would look like according to my lender:

Loan Amount: $450,000

Loan term length: 30 years

Interest Rate: 3.125%

Monthly P&I Payment: $1928

Cash out: $165,102

Here are some of the questions I’m asking myself:

Am I making a bad decision to change from 15yr to 30yr?

Should I take out more than

Should I keep at 15yr and just do a HELOC?

Should I refi for a 30yr and take cash out like I’ve proposed above?

Will my debt to income ratio be an issue if getting a loan for an investment property?

Should I refi for 30 year and do a HELOC instead of cash out? (This way I can have lower payments and I don't increase my debt any more which would give me a more favorable debt to income ratio.)

Primary goal: To purchase my first investment property, preferably a multi family home, within the next 12 months.

More details: My wife and I currently reside in the Boise, ID area and the market is crazy here (see my purchase price and current home value as an example) so finding a good deal around here is very hard. Over the past 18 months we have been learning about/researching real estate and have been looking for deals for the past several months. We are open to long term real estate investing, but we would need to research more and become confident in a specific area prior to doing so. Seeing that we already have $120K on hand (it’s sitting in stocks which we grew from the $70K from our 2019 cash out), I’m not sure that having the additional $165K on hand is completely necessary. There is a large possibility we might want to sell our home within the next year for a very large profit, but doing so would put us in the very tough position of finding an affordable home (less than $350K) here in the Boise area.

Any advice I could get, particularly pertaining to the questions I’m asking myself, would be so much appreciated.