Cash out refinance or getting a HELOC, which one is better to use home equity for investment?

Cash out refinance or getting a HELOC, which one is better to use home equity for investment?

Hey, my friend, if you own a home and now the market is great, so you have some equity built up. And you may have this question, should I refinance to get some cashout or should I get a HELOC, home equity line of credit? Welcome to Wealthy Wednesday.

So now the answer for that is it depends. Suppose you have a mortgage right now with the high interest rate. Maybe you got the mortgage in 2010, 2011 and you're getting a better interest rate now. Maybe it's a good idea to do a cash-out refinance. You pay off the old bank and then whatever the mortgage is, you just add whatever money you want to get cash out and get a new mortgage with a better interest rate. So that's one idea.

But for me, whenever you want to invest, because investment is different than you are paying a mortgage. Because the mortgage is a liability and you want to keep it as low as possible. Investment is, yeah, a mortgage or interest, you pay, but you're making money out of that money. So my suggestion will be to get a HELOC and keep it separate from your monthly payment. For example, you have a monthly payment here. You get a separate home equity line of credit and then treat that separately.

This means, when you're doing some investment, pay that money off or pay that monthly payment from that fund, not from your housing expense. So that's why it keeps two different accounts, two different money management. So that's very important because you don't want to mix it. Once you mix it, it gets very complicated or you don't even know that sometimes you're losing or you're gaining. So that is important. Home equity line of credit is suggestible on an investment point of view. And also suppose you are doing a fix and flip and you got some money out. Once you sell the property, you pay the bank back and then you take it again. So, you don't have to pay the interest if you're not using that money. So, HELOC is very good for that.

Hopefully this information is going to help you to become an investor because I believe every homeowner deserves to be an investor. At least buy one property. Hey, come on, you can do it. My name is Shawn Bhakta from Remax Presidential, South Florida Home Finder Team. I'm glad to help. Call me if you have any questions.

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