Author Topic: cash out REFI for rental property to pay off primary with new tax plan  (Read 986 times)

kenmoremmm

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assuming the republican tax 'plan' passes, and isn't overturned once (D)'s take majority in 1-3 years, it seems like 2017 will be the last year that itemizing will make sense for me (especially with including remodeling itemization).

so, does it seem worthwhile to do a cash out refi of a fully paid off condo (roughly $300k equity) to pay off $317k @ 3.325%? i assume the rate on the refi would be in the territory of 1% higher than on a primary loan rate, yes? if so, with today's rate around 3.9% (https://rate30.com/) that would put me at 4.9%, but then after schedule E deductions in the 25% bracket (or 24% bracket in the (R) plan: https://www.cnbc.com/2017/12/15/find-your-new-tax-brackets-under-the-final-gop-tax-plan.html), 4.9% really becomes 3.72%.

i'm sure there would be an appraisal fee ($500), the risk of not getting the appraisal to come in at the # we want (possible, but not likely in seattle at present), and then the costs to do the paperwork ($2500?). and the new rate would be higher than our current rate.

probably need to run some actual numbers, but just wanted to get some feedback in this initial stage. thanks

Mr. Boh

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Re: cash out REFI for rental property to pay off primary with new tax plan
« Reply #1 on: December 19, 2017, 11:01:18 AM »
I'm wanting to do this as well. My numbers are similar with about $240k at 3%. I would like to put my debt on a paid off rental house which would reduce my schedule E income. My accountant tells me that I wouldn't be able to subtract the interest from the new loan from rental income because the rental house was not the original purpose of the funding. This makes absolutely no sense to me so hopefully someone here can tell me something different.

BTW, my main purpose in doing this is to reduce my MAGI. At my current AGI my 2018 health insurance premium for my family of four will be $2039 a month. Thats $24,468 a year for the cheapest health insurance we could buy! If I get my income down a bit I will qualify for tax subsidies.

kenmoremmm

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Re: cash out REFI for rental property to pay off primary with new tax plan
« Reply #2 on: December 20, 2017, 01:01:27 AM »
i can't imagine your accountant is correct. hopefully someone with experience here will chime in as that's kind of the key part of the plan, right?

Mr. Boh

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Re: cash out REFI for rental property to pay off primary with new tax plan
« Reply #3 on: December 20, 2017, 08:40:01 AM »
i can't imagine your accountant is correct. hopefully someone with experience here will chime in as that's kind of the key part of the plan, right?

I think I'll start a thread in the tax discussion forum to see if anyone over there can clear that up for me.

lakemom

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Re: cash out REFI for rental property to pay off primary with new tax plan
« Reply #4 on: December 22, 2017, 10:26:41 AM »
Talk with some banks first.  The LTV ratios are much lower with rental properties and at leas in my locale banks don't like to do cash outs on rental property.

L8_apex

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Re: cash out REFI for rental property to pay off primary with new tax plan
« Reply #5 on: December 23, 2017, 09:21:42 AM »
My Boh, your accountant is absolutely correct.  (unfortunately)  And now the newly signed tax law also makes the interest on helocs on a residence non-tax deductible.  So the noose is tightening for ways to get a loan and write off the interest.

Enigma

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Re: cash out REFI for rental property to pay off primary with new tax plan
« Reply #6 on: December 26, 2017, 03:45:35 AM »
assuming the republican tax 'plan' passes, and isn't overturned once (D)'s take majority in 1-3 years
Big assumption... as Tax reform comes once but every 40 years.  The Dem would need the house, senate, and presidency.  Perfect storm like the republicans have now.  Even if the Dem overtook the house and senate in 2018 they still wouldn't have enough to override a presidential veto.  I would say the tax reform would be nothing different than the house and senate trying to dismantle Obamacare when Obama was in office