New to Real Estate · San Jose, CA · Member since 2016 · 1 post · 1 vote
I currently live in CA. I currently have about 50% equity in my primary home, we are thinking of moving into a quieter area in the next city over, a few years down the road, and want to retain our current primary residence as a rental property.
From what I researched, the two largest deductions available to me is depreciation, and mortgage interest. Would it make sense to take equity out of my current primary home, wait the required minimum time I must reside as a primary residence, and just the cash to purchase my next primary? From what I've seen, if the cash out refinance isn't use for capital improvements of the home, interest is non deductible.
@Wilson L. My wife and I used a similar strategy. We ReFi'd into a specialized 1st position line of credit that's tied to a ZBA. We did this while it was our primary residence, but it has now become a rental. The line of credit allows us to access that "trapped equity" anytime. With the ZBA, every normal checking deposit we make is swept directly towards our remaining balance, saving us interest cost. We were able to set our line of credit based off these inflated values, but we don't have to pay to access that equity until we use it, rather than tying ourselves to 30 years of higher payments with a cash-out. We get a 1098 at the end of the year for interest paid. As long as it's upgrades or real estate purchase related, it's tax deductible. It's been an excellent tool for us, so we always recommend this loan to anyone who qualifies!