Refinance Home Loan

Question: Refinancing home loan?

(Posted by: saga on 2009-08-18 06:43:14)

As our children have grown up, we are planning to buy a bigger house and move out of our first home. Our dilemma is what to do with our old home. Should we sell it or should we keep it as an investment property. There is so much confusion about what we can or cannot do. Here is our situation in brief. We bought our house 5 years ago for $320, 000 and we borrowed $300, 000. Currently our house is valued at $450, 000 and the remaining loan is $250, 000. We have an “all in one� account. That is where all our salaries go and we make our credit card payment at the end of every month. Maximum we have reduced our loan was $230, 000. But we had to redraw some money for personal reasons. If we rent it out what is the maximum loan we can claim in our tax return. Is it $250, 000 (remaining loan) or $300, 000 (original loan) or $230, 000 (lowest we have reduced)? Our accountant says that the real value we can claim is much lower than all of above. Because our loan is similar to a “line of credit� loan. Our mortgage consultant says that we can refinance the loan to the current value which is $450, 000 and claim that in our tax return. Please educate us and make our life easier.

Posted by: Steve from PA on 2009-08-18, 06:53:24

You have a home valued at close to half a mil...a tax accountant a mortgage consultant, knowledge and intelligence...why would u want the advice from some yahoo, yahoo? My advice to u is a age old one...u dont sell land..If ur in the positon to get another mortgage while maintaing a second home..well my friend u are privelaged and at the door step of increasing ur wealth with keeping ur property as investment revenue..

Posted by: MVD34 on 2009-08-18, 07:22:58

It is highly unlikely that your "loan consultant " is putting your needs ahead of his: consider that he is a salesman (selling you a loan) and then ask yourself if your accountant is a good accountant. Is your accountant a CPA? Do they have experience with real estate transactions? If so, listen to your accountant and find a new mortgage broker, preferably one recommended by your accountant. Based upon the information provided, your accountant's advice makes sense, your mortgage guys does not. However, I am a little confused about what you mean by "claim in our tax return. " If you convert your primary residence to a rental property, all the rules change. Basically, your first house becomes "a business " that is managed on a cash flow, depreciation, and profit after expenses basis. I agree with the other answer here, that you should be getting expert advice from paid professionals given the amount of money you have. If you are asking here because you don't trust or don't understand the people you have hired, you need to hire new people. I disagree about real estate ownership. It is a very difficult business to profit from in the long run. If you don't know what you are doing and/ or aren't interested in learning the nit-picky little details for yourself, sell.

Posted by: Alex on 2009-08-18, 07:24:42

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