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Updated about 5 years ago, 01/03/2020
HELOC: lower APR vs. interest-only payments
I'm going to apply for a HELOC on my primary residence to fund BRRRR properties. In shopping around, two options beat the rest, and I'm having trouble deciding between the two.
Option 1 is a 4.05% APR with interest-only payments during the 10-year draw period, and principal-plus-interest payments during the 20-year repayment period. A $100,000 advance during the draw period will cost $337.50/month.
Option 2 is a 3.74% APR with principal-plus-interest payments during both the 10-year draw and 20-year repayment periods. A $100,000 advance during the draw period will cost $471.23/month, with about $160 going toward principal and $312 being interest at the start.
(These are both adjustable rates. They both adjust with PRIME.)
I know there's no "right" answer, but I'm curious to hear opinions. Option 1 means a lower carrying cost. Option 2 costs more, but the interest is less, and the added cost is just buying back equity in my own home.
Which would you choose???
Thanks!