HLOC or Mortgage ?

[Account Closed]

Hello BP.

I wonder what you think about different of HELOC and Mortgage?

Say for example, I have $200K equity that I can either do

Option 1: Cash out refinance and pull money out to have cash in bank with Interest locked in for 20 year.

or Option 2: I can open up HELOC( Home Equity line of credit ) for $200k at little higher interest and not pay interest unless I use it.

Which option would you do ? and Why

[Alex Stewart]

I personally would do the HELOC. Interest rates aren't going to do anything dramatically quickly, so even though your HELOC has a variable rate it shouldn't burn you. In addition, unless you have a deal lined up that will lock up your money indefinitely (Buy-and-Hold), a HELOC allows you to probably pay less in interest because it will only be partially utilized at any given time. Additionally, you will save money in the long run on financing costs because you won't have to take out a fresh loan every time you do a new deal.