If your goal is simply to consolidate two loans, then consolidating two loans into one loan with similar terms has no impact. Your rental property interest is tax deductible along with all of the other rental property expenses (and taxable rental income).
If you have good credit and no need to use any of the equity from either property, you may want to consider refinancing your primary residence to a lower rate and pay off the rental property loan. I suggest refinancing the primary rather than the rental because you will get more favorable loan terms for the primary. You could take $490k of debt at ~5% down to 3-4% if you have good credit.
If you plan on purchasing more investment properties, that is a whole different post and you have a lot of equity here to use.
If your goal is simply to consolidate two loans, then consolidating two loans into one loan with similar terms has no impact. Your rental property interest is tax deductible along with all of the other rental property expenses (and taxable rental income).
If you have good credit and no need to use any of the equity from either property, you may want to consider refinancing your primary residence to a lower rate and pay off the rental property loan. I suggest refinancing the primary rather than the rental because you will get more favorable loan terms for the primary. You could take $490k of debt at ~5% down to 3-4% if you have good credit.
If you plan on purchasing more investment properties, that is a whole different post and you have a lot of equity here to use.
Does your rental property cash flow with 5% return allocated to the $900K value ($3750/month).
I personally do not understand having cash dead and buried in a property and wonder if there is not some better use for the money. Saving a couple of decimal points on a loan is not really the best value use for cash. Money needs to earn it's keep and you seem to have decided yours is dead and buried.
It was my mistake thinking the interest on rental is not tax deductible after opting for the 27.5 years of depreciation. After reexamining my tax return, I realized both are included as deduction.
I wasn't thinking of consolidating both loans in the beginning. It all started when a coworker got 3.8% for 15 years fix for her primary residence.
I was thinking about refinancing my primary (lower rate) to pay off the rental, but it creates the worries of not having tax deduction on rental property since my annual household income is around 50K.
Your primary residence also gets the mortgage interest deduction, it's just not on Schedule E.
I'm guessing from those interest rates that you have owned the primary for ballpark 10 years, and the rental for less time. To avoid "resetting" to year one of 30, you should probably refinance to current market rates on a 25, 20, or 15 year fixed product.
3.875% on a 15 year fixed is rather on the high side for good credit scenarios right now; your coworker did not get a good deal.
Your after tax cash flow is better if you reduce the interest rate on your debt. You will lose the tax deduction but you will save from not paying all the extra interest. Having to pay tax is a good problem to have.
IMO, I would be more concerned about not having leverage. I personally think REI is too much work to not receive leveraged returns. Lack of leverage also increases personal liability risk but there's a balance in all this.