Refinancing a high equity rental with interest only loan?

[Aaron S.]

Hi All, I’m new to BP and appreciate any insight from the community. I own a rental in San Francisco which I bought and lived in for a few years starting in 2003. I’ve been renting it since 2006 and watching it appreciate from 560K purchase price to an estimated 1.2M today. After the initial 5/1 interest only loan, I’ve been riding the adjustable since rates have been so low the past 10 years. Currently it is 4.375 adjusting yearly based on LIBOR. Now that rates are rising, I would like to lock in a longer-term fixed rate loan. My Mortgage advisor is suggesting taking out an interest only loan which would provide the maximum cash flow. But because I am not sure if I want to hold on to this property long-term I am also considering a 30 year fixed which would lower the payments also, but extend out the amount of time it would take to pay off the property. I have about 300K principal left. That leaves me with an insane 850-900k dead equity. I’d love some advice from you all as to what you’d do to refinance or to leverage that equity. Of course, I’m also considering selling it and using the equity to purchase more rental properties but because I am new at all of this I am a little bit gun shy. I no longer live in the Bay Area, I live in Denver. Thanks advance!