HELOC or REFI which is better?

Question

Due to unforeseen circumstances I’m having to put $120,000 in repairs into a newly purchased Duplex. I don’t have this much cash.

I have a SFH owned outright that should come in valued around $240,000.

Would it be best to try to get a HELOC or to Refi the SFH to get the cash I need to do the work on the Duplex?

I’ve never used either method yet. Thanks!

Dustin Little · Answer

That is substantial amount of needed repairs. A few things to consider, is it viable to put that much into the duplex? Could you go lighter on the repairs now so that you could get it rented without contributing such a large amount of cash toward it? Then over the next few years continue to improve the property?

If you go with a HELOC be sure you'll be able to pay it off as soon as possible. It is looking highly likely rates will be going up over the next months and perhaps years. HELOCs often come with variable rates and these conditions could take your monthly payment up. The cash out refi may be the better option. You'll be able to get a fixed rate and avoid the unpredictability of what may be in store for us in the coming future. Just pay attention to early payoff penalties.

In the past year I attempted to secure a HELOC; however, it is difficult to do with more than a few properties. Also, difficult to do with rental properties.

In either case, I think putting that equity to use is a good idea. Put the money into the duplex and then refi and continue on to another property.

Taylor Dasch · Answer

Either way will work so long as you pay it back when you cash out refi the house. If you arent planning on doing a cashout refi then I'd go with the HELOC and use the monthly income from the duplex to pay it off.