Cash out refi on Rental to Pay Down My Principal

[George Smith]

We have a practically paid off rental property (we owe 39K on a 5.25% 15 yr fix) in a great neighborhood that has had the same renter in it for 7 1/2 yrs. The home is worth. $400K Our primary residence is on a Interest only 5.75% Jumbo adjusting in 2015. We like the house we live in and plan on staying here for at least another 7-10 years. With the recent hit in real estate, we do not have much equity in our principal home. Does it make sense to cash out refi the rental into a 30 yr fix and use a lot of that equity to pay down our principal into a high conforming FHA at a very low interest rate of 3.75%? My thinking is, if we leave the principal, we will be taking the equity with us without being taxed on the income property? Also, it will lock us into lower rates. Thoughts?

[Account Closed]

Originally posted by Bill Gulley:

I might be behind, who is doing cash out refis on jumbo non-owner occupied SFDs in the secondary with 30 year fixed rates?

Bill,

If I understand it right, George wants to pull the equity from his rental to pay down his primary residence. The new loan on the rental will be $300k, which is conforming. The new loan on the house will be a conforming jumbo, which means the loan amount is between $417k to $625k. If it's FHA, it can be as high as $729k, but the fees are crazy with FHA.

You made me re-reading his post and think again. Is his primary residence currently underwater? Is he taking the cash-out from his rental to pay down the primary residence so that he could barely qualify for an FHA refinance? Not much equity is different from negative equity. Now that's a bad move. Talking about throwing good money after bad.