[quote=no_such_reality]Actually HLS, why not the other way. Refi the rental, strip the equity,may off the primary and put all the risk into the rental were if something happens on the income front the only thing with the lien is the rental?

A lot of people like the free and clear primary so they don’t worry about an aggressive foreclosure or the perceived cash drain in retirement.[/quote]

Fyi…slightly related …You can’t cash out-refi a rental and then deduct the mortgage interest on the amount you cashed out against your rental… unless you use the equity you took out to improve the property or to buy another investment. In the last scenario, you would deduct the mortgage interest as an investment expense on the new investment. Of course , some people cheat on their taxes probably. But I wouldn’t recommend it since if you get caught your would be in deep shit.

So you would lose your mortgage interest deduction on both your primary (no with no loan) and your rental I think.

Also, a rental you are probably paying 1/4 percentage higher on the loan, and some rentals cannot be easily refinanced or even qualify to get a loan especially if it’s an attached community with less then 50% own occupancy.