HELOC or Loan?
Question: Hi all, I have about $250,000 Home Equity Line of Credit from my current home. If I want to invest and buy let’s say a condo for $250,000. Would it be better for me to get the money from my HELOC and pay off the condo or get a loan from a lender? Is one better than the other? which one has lower interest rate? I am in Southern California. Please advice. Thanks in advance
Answer: If either of the loans have variable rate, then you have more risk. The H/E loan may be tax deductable, where as a loan for investment property may not be. You need to look into the details. Do you plan to buy more real estate? If so, be aware that banks will cut you off after the 3rd or 4th or 5th loan. Using your H/E loan allows you to buy a property without a new loan. Later, you can look at a 3rd property, and you have a paid-for 2nd property to borrow on. You will find it easier to get that 3rd, 4th, and 5th property. Again, if the condo is bought to flip, it will be easier to sell since you will not have a loan on it that has to be taken care of at closing.
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