Pay off mortgage or not

[Kevin May]

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Hi

I have a MF that I can payoff with cash and not break the bank.  Should I pay it off and then open a heloc.  By doing so I would receive $300/mo extra cash flow.  I would also lower the interest on the money borrowed. 

Should I keep the cash and buy another property or use the heloc for the next property?  WHat are some pros and cons to paying off an investment mortgage?

thanks for your input

kevin

[Ricardo R.]

Without know specific numbers its a bit hard to give you accurate advice. However, here is some generals food for thought... 

Why not keep the cash you have and not pay off your mortgage. Instead use the cash you have and use it to invest into another property. Additionally, why not also instead of getting a HELOC which is variable rate and usually has a balloon payment and instead get a cash-out refinance. This would also lower your interest rate (if it is high) but is a fixed rate which is ideal for investment so you can account for your numbers. A cash-out refi. usually lets you take out @ 75% of your appraised value. Some will argue that taxes are a con to paying off early however, no, if that's what you want it'll always be worth it however, consider that once you pay that money into the home to pay it off... its locked in there, frozen until you either sell, of refi. or heloc... either one you will still go back to owing someone. Personally I would cash-out refi. and then use that money plus the cash you have on hand and re-invest into other properties. If you did the math you would be able to pay off 3 properties that are cash-flowing faster than you could pay off one property.

Hope this helps. 

Alex