Foxed Rate Mortgage vs Heloc

[Adam Lerner]

I need some help with a decision on our new property. This is our 2nd rental. 

We are buying a 2br/1ba home in Hammond Indiana for $105k (a smaller 2/1 just sold nearby for 120k). In order to close on the property we are paying cash.  50k from a heloc, 50k savings, 5k seller credit.

Gross rent $1000 (will bump to $1300 on renewal)
Expenses, vacancy reserve, and maintenance reserve $450. 
Net cash before debt service = $550 ($800-$850 after rent increase)

We can obtain a mortgage on the property for 60k at 7.5% for a payment of $420 or we could pay interest only on the heloc at 10% of $417. 

I am hesitant to pay $4k in closing costs to get a mortgage right now when we will likely just pay another $4k in a few years to get a lower rate. 

Our personal finances are strong. We could throw $500-$1000 of principal at the heloc monthly to chip away at it for the time being as well as using the cash flow to pay the interest. 

I would love to hear some opinions.