Should I get a mortgage on the rental I own outright?

[Nick Brubaker]

Dear wise real estate investors,

I am small time.  Just own one rental property (outright), which is worth about $160k.  I am wondering if I should take out a mortgage on it.  Here are my considerations:

I will be leaving my current job in the next couple months and pursuing a career switch, which could take anywhere from 3 to 8 months (maybe more). I have enough funds available on the side to finance this transition for about 5 or 6 months assuming no surprise expenses. If I do need to tap into more money I have several years of Roth IRA contributions, which I could draw from (obviously not ideal).

An alternative would be getting a mortgage for the rental property now while I am still in my job.  This could be sensible in that even though I have great credit and a good amount of savings/assets it might be more challenging to get such a loan during the transition or after starting the new job.  I might have need to utilize these funds for other reasons in the next year or 2 as well - if other investment opportunities arise, if we move into a bigger house, if I decide to go the self-employment/small business route.  The downside to this would of course be that I would now be paying for closing costs and interest for this money - an expense which I would not have otherwise.  Because I am wary of the stock market and real estate market these days, a lot of this money would be somewhat sitting in the short term and the interest payments would only be costs that I didn't have previously.  That said if it gives me more freedom to make the right career choices or it allows me to act on investment opportunities in the next couple years, maybe it will have been worthing eating additional expenses for the first several months.  

What do you all think? Attempt to transition to a new job as quickly as possible though possibly having to dip into my Roth IRA, but hopefully still having the option of taking out a mortgage once I secure a new job being that my credit score and other factors are strong. Or avoid the option of dipping into my Roth IRA, make sure I can get a loan while I can, and give myself the freedom and funds to take the right opportunities in the coming months though having to eat the costs.

What do you all think?  Thanks!

Nick

[Kevin Sobilo]

@Nick Brubaker, have you considered a HELOC? (Home Equity Line Of Credit)

A line of credit would give you the security you want without having to make payments or be charged interest unless you actually need to withdraw money.