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should we refinance a paid off rental property to pay off primary house

by Charlie from Palos Verdes Peninsula, California. Apr 23rd 2013 Reply


William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,588 contributions

As a real estate investor with 25 years experience, I will say that you have greater more beneficial write-offs on a rental property vs. a primary residence. But everyone's goals and scenarios are different. So the best advice I can give you is to contact your CPA or tax advisor and run your idea past them... .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Apr 23rd 2013
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Charlie Sparks (CharlieSparks)
#9 ranked lender in New Mexico - 397 contributions

The quick answer is no, because interest rates are higher on rental vs. primary mortgages. There could be factors in which it would make sense so confer with a local mortgage lender from this forum. You should also look at any tax advantages to keeping the primary mortgage vs. paying it off with one on a rental.

Apr 23rd 2013
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Michael Ertem (mertem)
#435 ranked lender in California - 6 contributions

I would not pay off primary residence by getting a mortgage from rental property. Interest rates are higher on investment properties and also you would pay more in fees for getting cash out. You may consider refinancing your primary residence if your interest rate is higher than todays rates which is in mid 3s...Call me to determine if this a good option for you. www.michaelertem.comMichael Ertem

Apr 23rd 2013
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Jason Vondrak (jvondrak)
#221 ranked lender in California - 1,741 contributions

The interest rate on an investment is going to be higher than that on a primary residence. Have you already refinanced your primary residence to take advantage of the lowest rate possible? Feel free to give our California lending experts a call to chat about your situation at no obligation and determine what would be the best financial decision for you - 858-605-0952.

Apr 23rd 2013
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Dave Metsker (DaveMetsker)
#37 ranked lender in Oregon - 2,317 contributions

There is a real peace of mind, when your home is paid off. If you need the income tax deductions on the rental property, and the mortgage amounts fit, go ahead.

Apr 23rd 2013
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Peter Savino (855411LEND)
#100 ranked lender in New Jersey - 332 contributions

No

Apr 23rd 2013
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Michelle Curtis Loan Originator NMLS 401173 (EmbassyFundingLLC)
#76 ranked lender in Florida - 2,240 contributions

I have multiple rentals so my advice would be discuss this with an estate planner and accountant and discuss the tax ramifications on both scenarios to find out which would be most beneficial for you and your family. To be prepared I would reach out to a mortgage pro to find out what the terms would be on your refinance so you can discuss with your estate planner and accountant

Apr 23rd 2013
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Ryan Overman (ryan.o_200_877)
#905 ranked lender in California - 8 contributions

The rate your offered on a investment property will be higher than on your primary residence. I know the tax write offs on a investment property are better but you would need to talk to a CPA about the tax implications. I would not pull money out of my paid off property unless I had too but everyone has there own situation and reason for why they want the cash out. Pulling money out at a higher rate than your primary residence's interest rate to pay it off I would not suggest you do.

Apr 23rd 2013
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Caroline ( C G ) Gerardo (Caroline)
#904 ranked lender in California - 6 contributions

Everyone loves the idea of their primary home free and clear, it sounds comforting that you could retire and only pay property taxes. There are a couple other reasons besides the fact that the cash out refinance on a rental demands a higher rate and they are: 1. is your Modified Adjusted Gross Income less than $150000? do you pay Alternative Minimum Tax?2. What is The ROI return on the rental now? I assume with depreciation and expenses you show a loss. 3. Are you carrying passive losses forward? I don't see that as a benefit4. How old are you what expenses do your expect in future?5. How long do you intend to hold each propertyThe interest deduction is 100% on Schedule E and there is chatter about losing or reducing the personal mortgage deduction (this is a maybe in the future...)If the rate on one is higher than 4.5% then reduce the rate but don't cash out.Having liquid cash is more important than an "illiquid" house.Money/ cash can work for you while a house free and clear does have risk as well- make certain you have an umbrella policy in addition to full hazard insurance coverage that covers any accidental risk (trip and fall lawsuit that secures the house?)Caroline Gerardo NMLS # 324982 Newport Beach California, 92660

Apr 23rd 2013
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