Pro's and Con's to 15 vs 30 yr. refi on personal residence

[Jon Elson]

I recently did a rehab on my personal residence. Instead of selling, I will refinance, get cash out to pay off the refi and put myself in a zero debt position (except for the mortgage) to allow easier lending on investments.

15 yr - pay off home faster, better interest rate, higher fixed payments, 26% debt to income ratio, and increase equity for future HELOC's

30 yr - lower fixed payment, 20% debt to income ratio, higher interest rate, less equity for HELOC later.

Which is better way to finance a personal residence for a new investor trying to finance flips/buy-and-holds for short and long term.

15 yr - saves $ (interest) long-term and allows greater future barrowing through HELOC (which can be barrowed up to 95% and the home will be at 80% after refi).

30 yr - more cash in your pocket now and lower debt to income for future barrowings.

What do you think would be more advantageous for a newbie?

[Albert Bui]

It all boils down your to your opportunity cost of capital on the refi 15 vs 30 year decision. If you pay down equity quick, yes you save on interest, however you gave up use of deployment of those funds which could have been put to another use. What is your opportunity cost of capital ?

Once you've figured that out the answer is clear as night and day, what was grey now becomes black and white.

Something else to consider is your equity at risk from an asset protection stand point since home equity is not guaranteed, it has no rate of return, is at risk from litigants, and if you dont live in a 100% homestead exemption state like TX or FL then your equity is at risk from creditors too.

yes free and clear is great for emotional solace, but there is a reason the devil is in the details.