Real Estate Agent · Morrisville, VT · Member since 2022 · 9 posts · 4 votes
Good Afternoon!
My husband and I are finally taking the leap and building a rental (short term Airbnb or medium term, traveling nurses, etc) on our lower property. We thought this would be a good start for our investing journey a we already own the land and he's a builder. Curious what route might be best if we have alot of equity in our home? We plan to turn it around once done and refi again to hopefully build another rental. We were initially thinking cash out, but the closing costs and fees are high and we're not sure it doesn't make more sense doing a Heloc? I know these have variable interest rates, but no closing costs, is that risky right now with the rising rates? Still seems like we'd be paying less in the end if we refi again in a year though? Is there another option I'm not thinking of? Appreciate any input! :) Thanks,
Lender · Nationwide Lender (48 states) · Member since 2022 · 43 posts · 16 votes
4y
i personally am going with the HELOC, the rate on my first mortgage is just too low to refi for cash out. Check out PNC bank , they offer some pretty low rates. They even have a fixed rate HELOC option.
Investor · Tampa, FL · Member since 2022 · 68 posts · 56 votes
4y
I had also personally went with the HELOC loan. Seeing that my primary rate is waaaay to low to refi at this time, pulling a HELOC (currently at 4%) was the best option for us. Doing so, we were just able to close on a duplex using a DSCR loan and will eventually refi to a lower rate in the near future. Just make sure what ever niche/path you chose, just way the options. I personally had to go with 3 separate lenders to find the one that made sense. Best of luck!
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
Like the above posters, I also recommend a HELOC. No closing costs, rates are still low, and you really only need the HELOC to build out the home. Once it's built you can do a cash out refinance and pay off your old 1st mortgage and the HELOC with a new 30 year fixed.
Who knows where rates will be in 12-18 months, that's the biggest risk here.
Lender · Renton, WA · Member since 2018 · 215 posts · 216 votes
4y
@Amy Thompson
I'd do a HELOC to preserve your low first mortgage rate. Even though the variable rate could be higher, you only pay interest on what's drawn so it likely pencils out better than paying for a cash out when you don't need all those funds at once. Fixed rate HELOCs will be a higher monthly payment as principal is added so I stuck with a variable rate instead and we are arbitraging the money into private money lending until we find another investment property we want to purchase.