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?