Refi or HELOC

[Carlos Villalta]

So My current monthly payment is $870 @ 3.75%. I owe $70k on my mortgage and a balloon payment of $30k. If I refi or do a HELOC I'm told the $30k would have to be paid off first so should I do a HELOC or cash out refi? I want to put an Adu in my back yard. Was looking to pull out $150k. If I do a HELOC the rate is 9% and if I refinance the rate would be 6.75%. I currently have a positive cash flow every month of $500 after expenses are paid. Thanks guys

[Devin Peterson]

I would pay off the balloon for sure. Taking the cheaper rate seems to be best play always. HELOCs tied to prime have the risk of getting higher when it comes to the payment, yes - you have the flexibility to take and repay as you wish over time but in the long run the refi would win IMO in this strategy. Good luck!