Author Topic: Is it still make sense to payoff primary after cashout refi?  (Read 277 times)

lepa71

  • 5 O'Clock Shadow
  • *
  • Posts: 43
Is it still make sense to payoff primary after cashout refi?
« on: December 17, 2020, 09:56:01 AM »


So I'm wondering if it still makes sense to pay off the primary mortgage when I don't do itemized deduction anyway.

I refinanced my rental with cash out because I couldn't get anybody willing to refinance principal under $150k($135k to exact) or the interest would be too high. By taking $100k out I moved from 5% 30 years to 3% 15 years on rental. My principal on primary is under $100k at 3.25% 20 years term and the same thing, nobody really wants to refi it. I understand that I can't deduct full interest on the new $235k loan but if I payoff primary I would lower my real estate payment by $700 per month. That includes my primary and rental. I did some remodeling in the same rental replacing kitchens and flooring. I believe I would still be able to deduct interest based on pre-refi cashout $135K from now on yearly.

The rental is a duplex. I don't think it makes any difference.

Does it still make sense in my case? At least in my opinion I'm not losing anything.

Thanks in advance.

Proud Foot

  • Handlebar Stache
  • *****
  • Posts: 1137
Re: Is it still make sense to payoff primary after cashout refi?
« Reply #1 on: December 17, 2020, 11:55:21 AM »
There are many here who would argue that you shouldn't pay off your mortgage. Especially at the rates you are currently paying.

You say the rental is a duplex, what is your current tenant situation, how long do you think the will stay, and what is your current cash flow from it after factoring in vacancy and repairs?

Depending on your answers there I would hold a reasonable amount in cash and use the rest according to the investment order

lepa71

  • 5 O'Clock Shadow
  • *
  • Posts: 43
Re: Is it still make sense to payoff primary after cashout refi?
« Reply #2 on: December 17, 2020, 02:27:40 PM »
Here is my situation.

I have
1. Cash reserve 6 month- $35K
2. I maxing out my 401k yearly
3. Roth IRA and Trad. IRA maxed out yearly.
4. Enough money in the brokerage account.

For rental. It has been rented out without a break for the last 15 years. Hopefully stable for another 5-10 years or more. Rent is about $2900 for both sides. When I had an old mortgage the mortgage payment was $1375. Property tax is about $500 per month. Maybe another $150 per month for maintenance expenses. So let make a total of $2000 for easy calculations. For the primary, the monthly payment is $650. I was paying an extra $50. So $700.

My line of thought was either take $100K and put it in a brokerage account but in the current market, I'm concerned to put all of that at once. Another way, pay off the primary mortgage and add the $700 to the monthly contribution amount to the brokerage account. The 2nd option gives me a more gradual path and of course the feeling of not having the mortgage. the 3rd option could just to take that $100K and put it back into principal of the new loan but at 3% and just 15 years term, that just does not sounds right.

Any thoughts?



lepa71

  • 5 O'Clock Shadow
  • *
  • Posts: 43
Re: Is it still make sense to payoff primary after cashout refi?
« Reply #3 on: December 18, 2020, 10:31:13 AM »
Anybody with other thoughts?