Using a HELOC/Home Equity Loan for down payment

[Blake Wilson]

I am in the process of talking to banks about taking out a HELOC or Home Equity Loan on my residence which I plan to use for a down payment on a first rental property. I am having trouble wrapping my head around a couple of things:

1) When using as a down payment is one of these options better than the other (HELOC vs Home Equity Loan)? Or is it one of those things where both have pro's and con's and I just have to make sure the numbers work.

2) What I'm thinking is that I would use the money from the equity financing for the down payment and then eventually refinancing with a conventional loan to cash and pay off the draw I used towards the down payment so I can use it on another property. Is this a common strategy? What throws me off is that I see people in the forums that just keep the HELOC money in a property. With a variable APR and higher interest than a conventional loan it seems like you would want to pay that back as soon as you can right?