Refinance vs HELOC vs Hard money lender to finance first flip

[Amanda Casto]

I have the option of refinancing my first investment house vs a HELOC on the same house vs getting a hard money loan to finance my first flip. I am leaning towards going with the refinance because it offers the lowest rate and overall cost, but I'm afraid to place my home in harms way in case something goes wrong. I understand that it is a gamble and that if I use all the right tools and do my homework, I will minimize my risk and will be successful. Any thought or suggestions.

Thank you

Igor

[Scott D Burrows]

@amanda casto ... If it is only short term, why not go with the HELOC, as long as you only pay for what you draw (only option where you don't have to pay interest on the entire balance up front, and is interest only, allowing you minimal payments until you finalize and sell the flip, providing for the biggest cash flow of all the options.

A refi, you will probably end up paying for the total amount from day one, plus be stuck paying interest AND principle, and also the same costs that you would pay for anyways with a HELOC, but have less flexibility than a HELOC offers.

A hard money loan, even if it is in the 10's, you are only paying an actual, monthly interest rate of about .83% on the total (what will your timeline be?). If it will take six months, you will end up paying 4.98% interest on the total amount (.83*6 months). 

If it was me, I would and DO use the HELOC, because it offers the most flexibility for deals now and (if it is a revolving line), eliminates the need in applying for future funding down the line (some people will say that the adjustable rates can get you. However, not having funding for a deal, immediately, can also get you.) Also, usually the introductory rates are pretty solid (first year or so).