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Posted by Mark Bole on April 12, 2007, 8:28 am
77abe wrote:
> It seems reasonable to pull out te equity since it is tax free, maybe
> take a nice vacation for my wife & I, a vehicle for my daughter and
> invest the remaining.
Not sure what you mean by "tax free". Loan proceeds are always "tax
free", just as payments on loan principal are never tax deductible.
However the increase in mortgage interest payments you contemplate is
NOT a deductible expense of your rental.
Now to the extent you use the cash-out to earn investment income, the
interest for that amount could be tax-deductible as investment interest
expense. Keep track of the interest on the original mortgage and the
increase separately.
Leaving aside the "tax tail", if the "dog" results in a half-percent
drop in mortgage rate, that's probably good. The answer to your
question really depends on your other sources of funding for a car
purchase and whether you can afford a nice vacation.
-Mark Bole
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