Most of the discussions tend to be about cash out refi vs. HELOC with proceeds going toward things like home renovation, repairs, etc. Our home is a fine shape (aside from needing roofing in 1-3 years) and we have no immediate need for the cash. However, our liquid assets are relatively low and I'm intrigued by the idea of converting an effectively 100% illiquid asset into something more flexible for unknown future needs. If it were possible, I'd happily sell a pro rata share of the future house sale in return for cash today.
This isn't about playing house arbitrage. It's about taking advantage of a situation that is available today and might not exist in five years. Money is cheap at the moment. HELOC is possibly a cheaper option, but it tends toward variable rate products which I dislike. Many of the HELOC products also require zeroing out the loan balance in a much shorter timeframe than 15 years. That's not necessarily a bad thing.
There's about $250K in equity along with a 15 year fixed 2.75% mortgage. No PMI.
What are the pros & cons of pulling out $100K in cash and parking it somewhere for additional personal liquidity?
PROS
- cash in hand regardless of future swings in housing prices and/or credit availability
- higher returns investing cash in the markets vs. future increase in home equity (which isn't impacted either way by the mortgage)
- no tax implications
CONS
- $3,500 in closing fees
- higher APR on entire loan balance (pretty likely)
- higher monthly payment to cover the larger mortgage
- paperwork
Any other thoughts that would have an impact? Or other ways of accomplishing the goal of trading equity for liquidity?
Thanks!
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