Real Estate

Use HELOC to pay down which property?

  • Last Updated:
  • Jul 2nd, 2020 10:40 am
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[OP]
Member
Apr 30, 2019
385 posts
443 upvotes

Use HELOC to pay down which property?

Current Situation:

Primary Residence:
Mortgage Remaining - $250K
Interest Rate - 3.09% (2 years left before renewal)

Rental Property:
Mortgage Remaining - $400K
Interest Rate - 3.04% (3 years left before renewal)

I have access to a $100K HELOC at a rate of 2.35%.

Should I take out money and pay down the principal of my primary residence or rental property? I assume rental property
because I can write off the interest of the HELOC? Or am I missing something?

Any advice would be appreciated. Thanks!
2 replies
Deal Addict
User avatar
Jan 2, 2012
4395 posts
2570 upvotes
Toronto
ironman77 wrote: Current Situation:

Primary Residence:
Mortgage Remaining - $250K
Interest Rate - 3.09% (2 years left before renewal)

Rental Property:
Mortgage Remaining - $400K
Interest Rate - 3.04% (3 years left before renewal)

I have access to a $100K HELOC at a rate of 2.35%.

Should I take out money and pay down the principal of my primary residence or rental property? I assume rental property
because I can write off the interest of the HELOC? Or am I missing something?

Any advice would be appreciated. Thanks!
In general you want to reduce the higher interest amount that you can't deduct on taxes, so you should pay the $100K into your primary residence mortgage.

You are already deducting interest on the full $400K rental mortgage, so being able to write off interest on new HELOC is irrelevant. If you paid off the rental mortgage, then you'd just have $300K + $100K deductible so essentially same as before. However the amount of interest you could claim on taxes would actually be reduced since you'd be paying lower rate on portion of it.
[OP]
Member
Apr 30, 2019
385 posts
443 upvotes
Makes sense. Thank you!
rob444 wrote: In general you want to reduce the higher interest amount that you can't deduct on taxes, so you should pay the $100K into your primary residence mortgage.

You are already deducting interest on the full $400K rental mortgage, so being able to write off interest on new HELOC is irrelevant. If you paid off the rental mortgage, then you'd just have $300K + $100K deductible so essentially same as before. However the amount of interest you could claim on taxes would actually be reduced since you'd be paying lower rate on portion of it.

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