Cash out refinance or HELOC?

[Lance Foster]

My wife and I are looking into a couple of different options to fund our first rental property. Originally we were looking to do a cash out refi on our house to get money for the down payment on the rental of 25%. Ideally we would need about 50k out of the house for the market that we are looking into. Currently we own 175k on the house and a conservative value would be 270k. With those numbers we would get about 35k but I think the house would appraise for more potentially getting up to 50k. Rates have been quoted between 4.5% and 5.2% with about $3500 in closing costs.

I had one loan officer that was a friend tell me that I should get a heloc instead of refinancing because even with the higher variable rate I will still be saving for the little amount that we are pulling out over the closing costs of a refi.

I also had another loan officer tell me that was a terrible idea because the rates are going to go through the roof and I’m going to pay more in the long run on a heloc that he has one and wished he never got it.

Just looking for some advice as to what will save the most in the long run. We ideally would have the heloc paid off in 5 years.