By Reed Myers, Principal
Myers Capital Hawaii
As we are now full swing in tax season, remember April 18th is this year’s tax deadline for most individuals.
There are a few ways to use your mortgage to reduce your tax obligation, make renovations, or buy more real estate.
One strategy is the Re-Amortizing, Cash-Out Method:
- If you have a rental property, consider re-amortizing to a 30-year fixed rate to improve cash flow and tap into equity for renovations, purchasing of additional real estate, etc.
- Although rates have been rising these past couple of months, we are still at historic lows compared to years past (see chart below).
- If you took out a $300,000, 30 year fixed mortgage on your rental at 4.0% 7 years ago, your monthly payment is approximately $1,432, and you now owe $258,178.
- With the dramatic increase in home values, you could take out a new $350,000, 30 year fixed loan at 4.0% and your monthly payment would increase by $238/month to $1,670/month ($1,670 – $1,432). You now have a little less than $100,000 cash in hand.
- Your collected rents have likely increased more than $238/month versus 7 years ago. The extra annual interest you’d be spending on this new loan would actually assist with your increased income tax liability as it offsets your rental income.
- Your tenants will cover the debt service on the income producing property while allowing you to harvest larger tax deductions and obtain cash out of your property to invest in various ways. Win Win.
Find how you can benefit from re-amortizing and taking out cash from your existing property. Contact me and we can discuss your situation and develop a custom plan that can fit within your real estate goals.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. All mortgage products, rates, terms and conditions are subject to credit and property approval. This is not a commitment to lend or extend credit. Additional requirements and restrictions apply. Rates, terms and loan programs subject to change without notice.