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rated:
Good morning FW members

I need your expert opinions on real estate dilemma that I have.

I have a house in the Poconos that we bought as foreclosure, paid 70% cash and used some credit cards, we spent about 40000 fixing it.
We paid 115 000, it is appraised at 250 right now. We purchased it in 2013, annual property taxes are 8000.
I still have some balance left on credit cards that I can pay off without getting a mortgage.
My annual income is 95000, my spouse is a housewife and makes about 30000 while taking care of kids.
I wanted to refinance and get HELOC in case we need money in the future, is it a wise decision? Or should I refinance and get the cash out while the rates are still low?
All responses would be greatly appreciated.


 

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Then a cashout would be preferable to heloc

rufflesinc (Nov. 10, 2016 @ 5:51p) |

No you can't if the first home is worth 1.1 Million, then the 2nd home isn't worth squat. (I know OP said it's only wort... (more)

forbin4040 (Nov. 10, 2016 @ 7:30p) |

If I take a mortgage, it needs to be my primary residence for tax purposes correct? What if I will be renting when I lea... (more)

zau (Nov. 10, 2016 @ 7:48p) |

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rated:
refinance and get cash out

rated:
At a minimum, yes, get a no cost HELOC for the highest amount possible simply as a liquidity measure.

Whether or not you should pull cash out with permanent financing depends on your larger investment strategies and what you would do with the money.

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Thanks a lot for your responses. Right now we dont have an immediate need for money, but have been shopping around for an investment properties. The property taxes are a deal breaker in the area since they are extremely high. I dont really know what we would do with the cash if we refinance it out. Maybe just pay off the credit cards and save on interest.
Thank you again

rated:
Consider new 0% BT offers to replace those in place about a month or two before the current ones expire. One consideration is the tax deductions. You need a financing structure you can defend on your 1040 taxes. I failed to understand if you are living in it for the long term or flipping it.

rated:
We have been living there since 2013. I will leave NYC in 2018 so we are not sure if we will keep it or flip it. We might rent it out. I am maxed out on my deductions according to my accountant, is there any deductions I can get from paying the mortgage?
Thank you very much.

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zau said:   s there any deductions I can get from paying the mortgage?

 

  mortgage interest deduction

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Due to the size of the family our account told us that we are not eligible for any other deductions, so are we still eligible for mortgage interest deduction?
Sorry this might just sound dumb.
Thank you

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You are always eligible for ONE mortgage interest deduction...of course you have to be itemizing and have to exceed a certain amount.

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If you have a large family, it becomes a numbers game. Standard deductions vs itemized. The question is does itemized have enough deductions to outweigh the standard deduction? Standard deduction seldom gets audited. IF you are heavy in 401k, other tax deferred areas and have a large family, the accountant may have a good case for his opinion.

Given you level of certainly that you will leave the area in two to three years, a mortgage closing costs may be a questionable decision due to the short number of years to amortize closing costs.
Do insure a six month emergency fund. Shop for a 0-2 percent BT fee 0% CC account for cashflow purposes a couple of months before the current CC draw any interest. Some run 15-21 months.

rated:
zau said:   Due to the size of the family our account told us that we are not eligible for any other deductions, ...
  
That doesn't really make sense.    How many kids do you have?

Only way I can see this really making sense if if you have like 10 kids and your already paying $ 0 taxes.


Edit : .Its likely the accountant was talking about what FW10 points out above that its just the choice between the standard deduction and itemizing.   That makes sense.   But I'd question that too.   Married couple has  $12,800 standard deduction.    With $8k of property tax and probably $5k+ in NYS taxes you're already got enough to claim more by itemizing.    The # of kids doesn't impact the deductions.

 

rated:
I have 4 kids, and put 10% of my monthly income to ROTH IRA. I have always claimed 0 on my W4, never changed it.
I have money to pay off all the credit card debts but not sure if it is wise to use cash, or getting a loan will make more sense financially. I asked this question from my accountant but he wasnt able to give me an answer.
Once again I really appreciate all your help

rated:
You may want to consider getting a new accountant.

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forbin4040 said:   You are always eligible for ONE mortgage interest deduction...of course you have to be itemizing and have to exceed a certain amount.
  
You lost me with the emphasis on the word ONE.
You can deduct interest on two residences, limited to 1 million in purchase money debt and 100k in additional home secured debt like a HELOC.

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What does your SAH wife do that generates 30K a year?

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How much do you owe on the credit cards right now?

What do you have for cash in the bank now as far as emergency fund?

So do you live in this how right now?

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kriskos4 said:   What does your SAH wife do that generates 30K a year?
  She does consulting at home.

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jerosen said:   How much do you owe on the credit cards right now?

What do you have for cash in the bank now as far as emergency fund?

So do you live in this how right now?

  
I have about 40000 credit card debt (and 2300 balance on my line of credit. About 65000 for emergencies. My family has been living in the house since 2013, property taxes are way to expensive. Should I focus on paying off my credit cards without taking HELOC or a mortgage?

rated:
What is the interest rate on those credit cards?

I'm assuming/hoping you're using low interest promotional balance transfer deals.

How fast can you pay down the $40k debt?

Do you have other assets? Pile of stock, other property etc?

rated:
I would take out the HELOC and use as an emergency fund (in addition to your cash). Once that is established, I would pay off the CC and line of credit. With your combined income, you should be able to build up your cash reserve again fairly quickly.

You may want to post a budget to get more input if desired.

rated:
I like the idea of a HELOC. Best time to borrow money is when you don't need it. Some are free or very low cost. I'd look at the draw period--it may only be open for a couple years. I'd try to find one that can stay open for a long time.

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myfrogger said:   I like the idea of a HELOC. Best time to borrow money is when you don't need it.
  Then a cashout would be preferable to heloc

rated:
taxmantoo said:   
forbin4040 said:   You are always eligible for ONE mortgage interest deduction...of course you have to be itemizing and have to exceed a certain amount.
  
You lost me with the emphasis on the word ONE.
You can deduct interest on two residences, limited to 1 million in purchase money debt and 100k in additional home secured debt like a HELOC.

  No you can't if the first home is worth 1.1 Million, then the 2nd home isn't worth squat. (I know OP said it's only worth 250k)

Whenever I say something like 'two' someone here will always say you are wrong, so I said you always get one, to be safe.

rated:
If I take a mortgage, it needs to be my primary residence for tax purposes correct? What if I will be renting when I leave NYC for few years, we eventually end up in national capital region where I worked for the last 3 years and just came to NYC recently. The only other investment I have is my ROTH IRA and about 8000 for the college fund for my kids. Do you think I should try to put that money into my ROTH?
Thank you so much for all your responses. If the property taxes would have been lower we would have purchased few rentals years ago. Dont have any stocks, but should receive about 10 to 15K bonus by the end of the year.

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