Cash-Out or Home Equity Loan?

[Melanie Rodriguez]

Hello!

I am looking for some advice as to which course I should take: Cash-out refinance or home equity loan?

Home value: $400,000

Mortgage balance: $51,000

Interest rate: 6.125% - Fixed. 30yr.

Monthly payment: $875

I want pull $200,000 from the equity for my first investment property.

Which option would be better in today’s market conditions?

Which would give me the lowest monthly payment possible?

Which option is less risky?

Which is less overall headache?

Thanks so much!

[Nathan Gesner]

Quote from @Melanie Rodriguez:

If you cash out $200,000 and spend it on an investment, that's it. You spent it once and it's locked into another property.

If you get a line of credit, you can spend that $200,000 (or part of it), pay it off, and then spend it again. It's like a credit card that you can use over and over again. You also don't pay any interest unless you borrow, and then only for the amount borrowed.

I don't recommend using a line of credit unless you can pay it off faster because it comes with a higher interest rate.