Purchase with mortgage or home equity line

[Linda Manning]

I am preparing to purchase a single family house to buy and hold. I am trying to decide how to pay for it. I have one rental house with a home equity line against it (there is no mortgage against it). I have the house I live in and can get a home equity line against it (also no mortgage against it.) I see two ways to finance a purchase:

1. Get the home equity line against the house I live in. Use it and funds from the other home equity line to buy and rehab the house. After the house is done, get a mortgage against the rehabbed house and pay down my home equity lines.

2. Get a mortgage to buy the house using the existing home equity line to make the down payment and do the rehab. Then at some point refinance and pay down my home equity line.

I like idea #1 because I can make cash offers. But idea #1 puts all the burden on me--I'd be hanging out there pretty far. Idea #2 lets the bank put up most of the money.

Which is the better idea? Or do you have another idea?