Continue to Leverage HELOC or Cash Refi on Primary

[Whitney Hutten]

Hi! We are looking to leverage the equity we have in our primary residence to accelerate our rental business. We took out an HELOC as a backup for large expenses with our business. We've tapped it a few times to make quick down payments on properties but always paid it back off with other assets.

Now... I'm starting to realize that that equity in our primary earns 0% and we could do more with it (ie. invest it in other rentals) to accelerate our growth.  Our strategy is that our primary will become a rental anyways in 10-15 years (so we have no intention to sell... but at sometime, would probably need cash for another purchase).

Here is my conundrum:

• Currently, we our primary is in year three of a 30-year mortgage at 3.875%. have $155,000 equity we can tap in an HELOC at 3.99% for 4 years (variable after that to 10 years). If we tap the full equity we have an extra interest payment of ~$500 and a balloon at the end of 10 years/
• Refi Option: We can cash out refi our primary to 70% LTV at 4.25% and get $70K cash AND still have $85K in an HELOC. However, our primary payment goes up $350 per month for a 30-year mortgage. The game plan would be to pick up 2-3 additional rentals, and still have $85K to tap for large expenses or that golden deal. And, even with the bump in payment, we could still cash flow our primary too if we rented it out today.

Of course, I'm starry-eyed about the refi option.  So, please red ink this strategy, reality check it, or offer new views!  

Thanks!

Whitney