1031 Exchange with Mortgage or non-traditional financing

[Tim Charles]

I currently own a rental property that is financed with a standard mortgage. I plan to sell and 1031 exchange this property in the next 12-18 months. I have a priority credit line on my brokerage account that is now > 1% lower interest rate than my mortgage. If I pay my mortgage off with the credit line. What are the implications in the 1031 exchange? 

The current property would be viewed as being owned by me outright with no mortgage since there would be no lien holder on the title, correct? The full proceeds of the sale would be viewed as equity and I would need to hold (intermediary account) and invest that full amount into the exchange property? Is there an advantage to buying the exchange property as a cash sale in this scenario? Can I add a mortgage at purchase of the exchange property in lieu of the credit line? Can I add a mortgage after the purchase (cash-out refi) to pay off the credit line? Or should I hold (or refi) the mortgage I currently have at a higher rate to carry a mortgage on the exchane property? 

Utlimate goal is to maintain a healthy leverage on the rental property. There is short-term savings in replacing my mortgage with my credit line. I plan to 1031 exchange the property in the near future (12-18 months).