HELOC vs Home Equity Loan vs Cash out Refi

[Pablo Flores]

Hey Guys,

If I own my home outright and have no mortgage, and I want to tap into some of my equity to purchase another investment property, which of the above would be the best way to do this? My home is worth around 350k, and I only need about 120k for the investment home purchase. I've done a good amount of research but it seems like their are pros and cons to all of these loan options. Please help me understand but wouldn't a HELOC be better here because I could just draw what I need instead of getting a whole new loan on my home. It seems like the only downside is the variable rate but a lot of places let you lock the interest rate. If on the other hand I did a cash out refi would I just be able to pull out 120k from my homes value instead of getting a new loan on the entire value of the home? Maybe I'm not understanding this right so thanks for any clarification!

[Justin Phillips]

My wife and I have a very specialized 1st position Heloc on our property. It's tied to a zero balance sweep checking account, so all regular deposits and idle funds sit on our balance saving interest until they get swept back out for bills. It's been a great tool for us. Whenever an opportunity arises, we simply write a check from our line, then pay it off very quickly using our depositing power. It gives you 30 year access to equity, but you only pay for what you use. It sure beats signing up for 30 years of interest first amortized debt on a traditional cash-out ReFi. 
In your case, you could have that line of credit set to $280k, but you'd only draw what you needed. I'd definitely recommend checking it out as an option.