Should I pay off my mortgage?

[Kevin Aljic]

I know I know there are few posts about this topic but wanted to tell you about my situation and see what you think so here we go. 

I own my personal property worth 575K and mortgage is $365K. I own a rental property outright and rents for $2200 a month. 

This is my Idea.... I can do a cash out refinance on my rental which would give me 250K in cash at 6.5% for 30 years with payment of $2185 but my rental income will pay for that. Then I turn that 250K plus $115K from my savings to pay off my mortgage which will save me in total $67K in interest. And then since I love real estate I would get a HELOC against my home which is $460K and continue to flip with those funds.

Thanks for your input 

[Scott Passman]

@Kevin Aljic  First of all, what is the interest rate on your primary home?  I'm guessing it's likely pretty low (<6%), which if that's the case that is an incredible amount of risk exposure you would be taking to pay off a low interest loan. 

The other thing is based on your numbers of $2200/mo in rental income, if you refinance your rental property and have a $2185/mo payment you will be refinancing into a negative cash flowing asset.  Taking into account vacancy, cap ex, maintenance etc. you will have no cash flow and that property will cost you money rather than make you money which is never a good thing. 

What about the possibility of just using a HELOC on your home now for additional funds? If you need access to more cash, could either look for a hard money lender or pump more equity into the home via overpayments for a year to build up the equity to use for a HELOC.