Cash Out Refi Consequences

[Alfred Litton]

I would appreciate some sage advice. I own a few SFHs outright and also have some personal debt I incurred to purchase another SFH. (A Lightstream loan.) If I were to do a cash-out refi on one of the properties I own outright to pay off that Lightstream loan OR some other personal debt, are there tax or other legal consequences I might encounter. I'd have to switch the refi'ed home out of my LLC into my personal name (quit claim deed). Does the refi simply act as a capital withdrawal from the LLC for tax purposes? I just don't want to get into a tax jam for doing it. The hope would be at the end that I have deductible interest (new mortgage on the cash-out property) and no more non-deductible interest (Lightstream and a credit card or two in my personal name). Kosher? Good idea? Bad idea? (Thanks for any advice.)

[Timothy VanWingerden]

When you cash out refinance, you are putting your paid off property on a mortgage. From a tax perspective, your interest expense is deductible on your new mortgage. I'm not an accountant but from my understanding the cash you get from the refinance is from your equity so there are no capital gains taxes or anything like that because you did not sell your property. 

I would do the cash out refinance to pay off the short term debt if it were me.