TX HELOC and HEL questions

[Connor Heim]

Howdy! Looking into using equity in my home to start investing. From what I understand, TX has some rules that I need to be aware of. HEL can be up to 80% of value, and HELOC up to 50%.

My home is worth about $750K.  I owe about $300K, so we've got around 450K in equity.

According to TX rules, I should be able to get a loan for up to 600k, but since we have 450K equity, would I qualify for a full 450?  Or just 80% of my equity?  

Kind of confused and would love a little guidance.

Thanks!

[Mark Buskuhl]

You can do a cash out refinance for $600k which will payoff the existing $300k mortgage putting $300k in your pocket to play with. 

Or, leave the current mortgage in place and get a HELOC for $300k. Both cases you'll have access to the same amount of cash.

Benefits to a refi are fixed rate 30yr term availability, HELOC will be adjustable rate with more flexible repayment options (interest only).

HELOC is better if you plan to use the money temporarily such as fix and flip or buy with cash and then convert to a traditional mortgage. You only pay interest when using the money. Refi is better if you plan to use the funds to own a rental free and clear.