HELOC for Fix N Flip in LA

[Samantha Derman]

Hi all, looking for advice before I pull the trigger on a HELOC on my own home. My goal is to use the money for fix n flips. I definitely qualify for a good chunk, but trying to decide if it's better to get an interest only HELOC or a P and I HELOC. Or should I just not worry about that and go with whichever has the lower payment knowing my goals are to lower carrying costs and I'm going to pay off the principal when I sell. Also variable rate vs. fixed... I assume fixed because I want to know what the carrying costs are and don't want any surprises, but I'm open to any and all experience!

[Tim Delaney]

You should talk to a few bankers about options. Traditionally from what I have seen HELOCs are always interest only and usually variable. They operate like a credit card - when you are not using the money you don't accumulate interest, when you are using the money you accumulate interest and need to make monthly payments. A Home Equity Loan is usually a chunk of money you get up front and start making P&I payments on right away for a set amortization period. Once you pay that money back to the bank you cannot access it again. That said, I prefer to use a HELOC for short term investments like fix & flips because I only pay for what I use and I can continually keep recycling the money.