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Should I refinance my mortgage on my residence, my rental, or on both?

Should I refinance my mortgage on my residence, my rental or on both?  Both mortgages look like good candidates for refinancing but I'm unsure what strategy to take.  My home is worth $457,000 with a loan balance of $247,000 at 5.875% (PI is $1,624/mo.).  My rental condo is worth $206,000 with a loan balance of $106,000 at 6.625% and rent of $1,500 per month (PI is 850/mo.).  The rental is in excellent condition and has a solid 6 year rental history.  With my rental expenses (mortgage interest, taxes, HOA, etc.), I barely come out with a net loss each year on my personal income taxes.  Should I refi my rental mortgage to the maximum to increase the mortgage interest deduction to insure I don't come out with an extra tax burden for years to come AND/OR should I either refi my home mortgage to get a better payment OR should I refi my home mortgage to the max to pay off my rental and be able to directly deduct all of the mortgage interest (while enjoying my rental free and clear but paying tax on the increased income)???  At minimum, both mortgage payments would benefit from lowered interest rates (with fairly quick paybacks on the closing fees).  However, if I max out my loan on my home and payoff the rental, I'll save about $1,000 in closing fees over 2 separate loan refinances.  My wife and I earn $91,000/year income from our jobs and that is our only other source of income.  We also have $50,000 in unsecured consumer debt (credit cards).  Our credit rating is 797.  Decisions, decisions!  Can you advise?
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April 17 2009 - Abbott Loop
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Answers (3)

Profile picture for Ken Kopper

jbpro, based on the interest rate/balance on the rental, I would suggest leaving that loan out of the mix. Perhaps consider paying additional principal to reduce the interest expense by accelerating the principal.

As far as the primary, lots of variables to consider, but you may want to look into refinancing fow lower rate and possibly to consolidate the credit cards based on your equity position. If you decide to cash out, you should seriously review your spending habits to prevent you from repeating the behavior that put you in a position with 50k in plastic debt. If you can comfortably afford all of your payments currently, consider increasing the payment on your new  loan to what you currently paying  between the mortgages and cc's so that you can expedite paying down the debt.

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April 18 2009
JB,

No adcice on what you should do about refinancing. .. I thought I would respond to your "break even" calculation. You are only factoring the cost of doing the loans and pay back period by monthly payment savings. Nothing about the "cost" of "re-amorization." You will be starting all over from ground zero. Pick an Amorization Calculator and play with the numbers. ... Good luck, Rudi
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April 18 2009
Now is a good time to refinance both.  You can do them concurrently.  Submitt quote request to get an rate quotes,  Consult an tax accountant or financial planner on the rest.
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April 17 2009
 
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Should I refinance my mortgage on my residence, my rental, or on both?
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April 18 2009 | 3 answers
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