Cashout refi on Primary Residence to payoff rental mortgage

[Vinay K.]

Hey Friends, I have a 450k loan on my primary residence (currently at 3.5% for 30 years fixed). I can get 2.625℅ for 7/1 ARM. Zero closing cost. More options:

- If I pay 1000 dollars in closing then rate becomes 2.5℅

- My rental has interest rate of 4.625%@30 years fixed. Loan amount is 116k. I can take 116k cashout (still get same rate)  during primary residence refinance and payoff rental and save 2℅ interest. 

Any thoughts/suggestions?

[Thomas S.]

There is no financial reasoning to justify paying off a rental property. The less the equity in the property the better. If you can get money out of your primary use it to buy more properties do not waste it on paying down a rental mortgage.

Contrary to many investors limited knowledge of rental properties having equity in a rental, or even worse, paying off the rental mortgage actually reduces cash flow from the property. If you are a smart investor you know cash is worth more than the measly amount banks are charging for mortgages today. 

Never leave money dead and buried in a rental property, it kills the properties cash flow..