Q: My house is valued at $500,000 with no mortgage. I need $150,000 to buy another house for investment purposes. Should I get a "home equity" or "first mortgage" loan?
A: A new first mortgage (cash-out refinance) would bring the lowest interest rate and longest available terms. This is probably a key consideration for your purchase of an investment home, since you are arguably going to try to cover all the financing costs though the rental income you will receive. In terms of convenience, a home equity loan will probably be simpler to obtain, with lesser up-front cost, but terms generally don't extend beyond 20 years, making monthly payments higher.
Should I use a home equity loan or a cash-out refinance?
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