HELOC vs cash out refi

[Shain Cannon]

Unfortunately the deed is already done, and I’ve learned in the process. However now that I’m learning more I am curious about the most logical approach.

At the time I wasn’t comfortable with a a heloc and didn’t underand the full process, so on my primary residence I took a cash out refi and put 40k into the kitchen, flooring and removing a wall. Then I refi’d again a year later to get the interest rate back to 3.75 from the 5.25. Unfortunately now I’m considering selling anyways so that’s a subject for another time.

Knowing what I know now, I believe it would have been wiser to do the heloc for the renovation, then refi afterwards to pay off the heloc. Rather than the in between cash out refi.

Original purchase price was 300k. At time of cash out refi I was down to 278k. After cash out I believe it was 322k. And after the latest refi 330k. So my 40k investment ended up costing me 52k according to my numbers. So each refi had closing costs of about 8k. No biggie. Small fish in the end game, and the current arv with current housing prices is around 500k so I’ll still win. Just curious about this scenario and using the heloc or cash out refi. I believe I learned an expensive lesson on this one.

Thanks

[Amberly Jones]

Thanks for sharing this. Its a great reminder to other folks who haven't been through it before. I usually suggest HELOC depending on the amount of cash needed --> especially never do a refinance if it increase your existing mortgage rate. There are other ways to access cash for relatively minor (sub 80k) renovation projects