Using personal home equity for investing

[Ben Bartels]

Do you have any recommendations/guidelines around using equity in your personal home for investing? Is it smart to keep refinancing into 30-year mortgages since the interest rate on that money is lower than other loans?

My wife and I purchased the house that we live in in 2019. Originally, our goal was to pay off the house as quickly as possible, so last year, we refinanced our 30-year, 3.99% mortgage to a 25-year, 2.99% mortgage. Now, we’re rethinking that idea since conventional mortgage rates are higher on investment properties. Mathematically, it makes sense (I think) to maximize our loan, both in terms of duration and amount, on the personal property and use that money for investing. However, since we’re new at this, we’re looking for advice from the community on whether or not that’s a good idea. What have your experiences been on this topic, and what factors do you take into account when making this decision?

For context, we are stable income-wise, so no concerns about a job loss or injury preventing us from making payments. Our house has appreciated about 15% over the past two years, so we should have some equity we could take out in addition to lowering the monthly payment.

One last note: I know a HELOC is another option. From what I've seen, I think the rate is generally higher, and I'm not sure how lenders would feel about us using a HELOC for down payments. Even though refinancing is technically taking on debt, just like a HELOC, it feels different. If anyone wants to speak on how they chose one or the other though, please feel free!