I have two homes should I refinace one to pay the other off?

[Aaron Marshall]

My company laid every one off.  I got a new position with my company in a different state and will take a 10K cut in pay.  I have one duplex and my current residence.  Im trying to keep my cost low so if I cant rent my current residence I can still cover all my bills.  My duplex is worth 175K - 165K I owe 100K on it.  My duplex loan is for 130K and I pay $890 per month that includes my property tax of $2150 and insurance of $624 a year my duplex doesn't make money it just breaks even (I've never had a problem renting it out). My current residence is worth 115K and I owe 75K on it.  My current residence loan is for 100K and I pay $580 a month that includes my property tax of $856 and insurance of $872 a year.  Total mortgage payment $1470 per month. If I refinance my duplex for 165K and put 10K out of pocket and pay off my current residence my payment will be $1120 per month at 5% interest that will save me $354 a month.  Should I do this and is there any benefit to having the home paid off that I'm missing? if I do this and everything goes bad is there a way to protect the house that is paid off? Do you see any thing I haven't considered or should consider?

[Charlie Fitzgerald]

I would not do this.  For a few reasons.  1.)  You are unlikely to find a lender that will give you a 100% cash-out refinance on your duplex (using the low estimate of value at $165,000 and your desire to borrower $165,000 = 100% ltv)  2.  Your $10,000 cash out of pocket is better left in the bank during your transition...cash is king... it does more for you than it does paying down a mortgage right now, even if you could get one.  3.)  Paying the house off, eliminates your interest deduction on that house, which you will likely miss right now.  4.)  Not knowing the interest rates on these loans now, I can't say for sure, but it is likely that you will just be moving your debt stack around and when you factor in the costs to refinance and your lost mortgage interest deduction (which will give you higher taxes on your lower earnings), you likely will not be saving as much as you think...(if anything at all) for a number of years.

Hope this helps...hang in there...change is only bad if you let it be.