does it make sense to Refinance to pay off a home mortgage

Question

Hi,

Since the tax reform, the primary home mortgage interest we pay is no longer a deduction. In this case I'm thinking maybe I should refinance an investment property to cash out the exact amount to pay off my primary residence. This would first consolidate the loans into one, and secondly the entire loan would have tax benefit. But I also heard of cashing out to pay for anything non investment related will disqualify the mortgage interest to be a deduction. Not sure how realistic this is though.. when you put in a deduction for an investment property when you do tax return, will IRS really check for what you did to the money you cashed out? looking for advices

Jacob Sampson · Answer

The primary home mortgage IS still a deduction if you itemize.  They just raised the minimum deduction to the point that it is more than most people's itemized deductions.

I would be willing to refi a rental to pay off my home mortgage because in most states your personal home and qualified retirement accounts are protected from bankruptcy/law suites so they are one of your most secure places to stash your money (although fairly illiquid).  So you would be taking at risk equity and moving it to a less risky equity.

But you should look into your states homestead laws.  I think that is the name.