HELOC vs. Cash out Refinance

[Nicholas Catanzariti]

Hi all,

I am looking to purchase my first rental property, but am debating on which route I should take to finance the property. I have been offered a 90% LTV HELOC at a fixed 2.99% APR for the first 6 months then moving to a variable 4.25% APR after that. My current mortgage is for ~ 275k and I believe the house will be valued somewhere in the range of 400-415k when appraised. I am not sure if I should do a CO REFI to avoid the potential of the variable rate increasing. I do not have a specific property targeted to invest in yet so I would benefit from the HELOC by not having to pay the interest while I continue my search.

Anyone have any thoughts?