Author Topic: Pay off the rental house or my house?  (Read 1836 times)

DavidInDc

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Pay off the rental house or my house?
« on: September 18, 2013, 12:09:08 PM »
I have a delema.  I own two houses (on the same block so easy to manage) and both are mortgaged.  The question is assuming I have decided to pay these off vs investing in stock market.

Rental is Mortgaged at 290k@4.25
Home is Mortgaged at 410k@3.25

Going by interest rate paying of the rental first makes more sense (also the part of the money covering the mortgage would then be available to accelerate my primary home.  But I have read that retirement and value of your primary home are not taken into account when looking at financial aid for colleges (I have 2 kids to put through starting in 7 years).  There is the ease of sleeping knowing your primary home is paid off.  Primary home is not subject to bankruptcy etc.  The mortgage P&I on the rental is about 1500 and both loans have about 28 years currently (looking to cut that way down).

So really two questions if you could have two properties of equal value paid off which is better to have your home (no mortgage payment) or the rental (higher income stream).  The second is based on interest rates, tax advantage, liability, and other financial conciderations where is the better place to have equity.

Anyone done this analysis for themselves?

Numbers Man

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Re: Pay off the rental house or my house?
« Reply #1 on: September 18, 2013, 12:27:21 PM »
Interest expenses related to you investment property lower your net profit on the investment, which in turn lowers your taxes. I would pay off my personal residence first.

But if you're flexible, you could stuff money into a 401k plan in the money market account (since you don't want to be in the stock market) and you can dramatically lower your taxes by contributing up to the max of $17,500 ($35,000 for a married couple).

MakingSenseofCents

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Re: Pay off the rental house or my house?
« Reply #2 on: September 18, 2013, 01:47:14 PM »
Interest expenses related to you investment property lower your net profit on the investment, which in turn lowers your taxes. I would pay off my personal residence first.

But if you're flexible, you could stuff money into a 401k plan in the money market account (since you don't want to be in the stock market) and you can dramatically lower your taxes by contributing up to the max of $17,500 ($35,000 for a married couple).

I say personal residence first as well.