I have a HELOC, and recovered my cash... do I pay it off or reinvest?

[Jon Huber]

I am an advocate of the BRRRR Method, and I have put this into action this year. I took out a HELOC last year, and got a great rate and am paying interest only for ten years. I used that HELOC to purchase two great cash flowing properties. I have done some good work to improve the values, and even brought the rents up. In a couple of months, I plan to refinance those two properties, and take cash out. Considering appreciation, the fact that I purchased below market value, and the work that I have done on the property... there is a chance that I may be able to recover my original HELOC amount. I am not positive, but I am just getting an idea for it IF I can.

Would it be advantageous for me to pay off the HELOC (as a sign of good faith and to show that I can pay off loans quickly), and then take out another HELOC to invest more... or because I am still only in the first year of a ten year HELOC, it doesn't really matter and I should just reinvest the cash?

Would love some feedback from someone who would know the pros and cons from a lending standpoint, or even @Brandon Turner on #AskBP (even if he DOES say there is no right or wrong answer, just a right or wrong answer for ME... kidding, kidding).

[Linda Weygant]

I think it depends on whether this is a true HELOC or if it a 2nd mortgage.

With a true HELOC, you can draw and repay money as you like (within certain minimums, of course) with no closing costs and you don't have to requalify for the amount the next time you draw it up from zero.

If that's the case, then I'd go ahead and pay it off and save the interest expense if you aren't actually using the money.  You can always draw it back up again at a moment's notice if necessary.

If it's a 2nd mortgage and you have to pay closing costs and requalify every time, then I'd say leave it.  Pay the interest and put that money back to work asap.