HELOC vs Cashout refi

[Nathan Alvarado]

I bought my first property last year in July. I put 20% down and put a good amount towards the rehab cost. I'm thinking I should have around 104k-129k in equity. I was wondering what would be my better option to get a down payment for my next property. Either the HELOC or cashout refi? My current APR is 7.15% I'm pushing towards the HELOC because lower cost on closing costs and refi interest rates are the same as my current loan right now.

[River Sava]

Hi Nathan - Congrats on your first property

With a HELOC, you're right about the lower closing costs being a plus. Plus, it gives you flexibility as you can draw funds as needed and only pay interest on what you use. Though, keep in mind that HELOC rates can fluctuate with the market, potentially exposing you to higher interest rates down the line.

On the other hand, a cash-out refinance could lock in a fixed rate, providing stability/predictability in your monthly payments. While the closing costs may be higher than a HELOC, the long-term interest savings might outweigh this initial expense depedning on the property value, LTV, credit, etc. If the rates for a cash-out refi are similar to what you're already paying, it might be worth exploring, especially if you prefer the certainty of a fixed rate.