Cash Out REFI vs Heloc

[Ken Sellers]

Hello everyone, i am new to this site and this is my first post, so i would just like to say hi and thank you guys in advance for any information your generous enough to share. I have read numerous information about the subject in question already, including videos from this site. But since every situation is very specific, i would like to give you the details on mine. I currently own one property, which is the house me and my wife have lived in for 10 years. Due to the historic low rates, we are already in the middle of a REFI. We were at 4.625, and are currently locked into a 2.625. Shortly after starting the REFI process, i became interested in investing, which in a very short time has lead me to the conclusion that it is time to buy our first investment property. I still have questions on my overall approach and strategy, but i will leave those for future posts and keep this focused on my current decision point-which is whether i should use a cash out REFI while im in the process of refinancing right now, or open up a HELOC afterwards, both in regards to tapping into the equity on my house to fund a down payment on the investment property. In terms of equity, we havent had an appraisal yet, but it should be in the 200-250k range, and at 80% i should have access to 120-150k.

-My current REFI numbers are a 245k principle on our house @2.625. My lender told me that if we chose a cash out refi for ~100k, that rate would go to 3.25. I have not got quotes on what a heloc rate would be. But our debt to income is very good and so are credit scores. I know Heloc rates typically tend to be a bit higher, so im working off the assumption that ours would be somewhere around 4.5. Helocs also come with the risk of the variable rate.

So what do you guys think? Is reducing the interest rate on the 100k+ in equity worth bumping my 245k house principle up ~.5%? 

My thoughts: with the uncertainty surrounding everything due to covid, tapping into our equity vie cash-out REFI and securing it now to have liquid capital seems safe. Ive been told that in extreme circumstances, lenders could freeze your access to HELOC....which would deny us access to capital. Also we would eliminate the risk of the variable rate associated with the heloc. However, the HELOC allows you to make interest only payments for the draw period. If i go with a cash out REFI, i will have to make payments on that equity every month, which could limit cash flow opportunity. Any variables i am not taking into account?