Refis: HELOCs vs. Cash Out?

[Christen G.]

Hi all,

We're working on re-fing three small multi-families that we're holding that have higher rates and ~$300k in combined equity! In the COVID-19 financing climate locally, we're seeing higher interest rates for investment props and cash out products. We're deciding between:

1) Refi into lower rates and payments (1-1.5% lower) and then getting a HELOC on the equity. Pros: lower base interest rates, lower adjusted monthly payments, lower loan costs, HELOC applications costs are minor, not paying interest until the money is used for that next investment.

2) Cash out refi on all 3 properties - Cons: higher base % rates, higher loan costs, similar monthly payments, Pros: fistfuls of cash to parlay into the next deal

3) 1st Lien HELOC - buy out the current loans balances with a HELOC with 1st lien - Pros: Even lower loan costs ($10-$15k less!), lock in rates on the balance used to pay off the loan, and continued use of 10 years revolving line of credit. Cons: you tell me, I hate the word "lien."

Some questions:

- Are folks having problems getting access to HELOCs right now? I hear these are the first to 'dry up' during 'uncertain times.'

- Is everyone seeing higher rates for investment properties and CASH OUT refis?

- What are concerns with HELOCs if we plan to lock in rates on the $$ used, pay down principle ongoing, and treat it like a loan (with the benefit of a revolving credit line)?

- Why does Cash Out Refi come across on BP as the holy grail with little to no mention of the HELOC method?