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Tax consequences of Loan consolidation
Hey everyone! I'm looking for a little help and I'm hoping someone around here can provide some insight. I'll detail my situation here.
I am looking to purchase a new primary residence ASAP. I currently have 10 first mortgages (residential) +1 for my primary residence. The conventional loan max is 10+1.
In order to finance a new primary residence, I will need to reduce my loan count by 1.
I'm hoping to do the following:
Cash-out refinance Property A, with a new, bigger first mortgage.
Take the proceeds from Property A and pay off Property B.
So, In summary, instead of having two small loans on Property A and Property B, I will have one big loan on Property A.
I have presented this idea with my CPA, and I was told the cash-out portion of the refinance would not be tax deductible because cash-out refinances must be applied to improvements on the same property.
I reached out to a second CPA for another opinion, and they were not aware of any reason why the interest on the cash-out refinance would not be tax deductible as long as the funds were used to pay off a purchase mortgage on another rental property.
That's where you come in :).
I would like to hear your opinion on the matter, or some possible ideas on how to reduce my loan count by 1 (other than paying it off with cash).