Rental Property - Refinance, Don't Sell

Written by Steve Gillman

You own a rental property for years, and never seerepparttar "big pay-off." Is it time to cash in on your investment, now that you've paid downrepparttar 149291 mortgage, and values are up? Maybe not.

The Problem With Selling

Selling means you'll have to pay a large capital gains tax. This can be avoided if you reinvest through a 1031 exchange, but thenrepparttar 149292 point is that you want your money, right? Also, a good rental gets more income as rents go up. Do you want to lose this inflation-indexed retirement plan? What'srepparttar 149293 alternative?

Refinancing Rental Property

Have you considered that if you refinance, you can get much of your gain out ofrepparttar 149294 property, without paying a penny in taxes? Borrowing money is not a taxable event. You can take it and spend it however you want, and still keep your rentals.

Let's look at an example. Suppose you have owned a small apartment building for years. You bought it for $240,000, with a downpayment of $40,000, and mortgage payments of $1650 monthly onrepparttar 149295 balance. Now it is worth $400,000, you only owe $120,000, and your cash flow is around $800/month. How do you get at that equity?

The Debt Test: are you making out a mountain out of your mortgage?

Written by Rachel Lane

According torepparttar Council of Mortgage Lenders, first-time buyers arerepparttar 149290 most susceptible group of homeowners to debt, as they are more likely to have higher loan-to-value ratios and commit a higher proportion of their income to mortgage repayments. Despite their susceptibility to debt, there is evidence which indicates that insurance take-up and employee benefits provide recent first-time buyers with a safer foundation thanrepparttar 149291 general population of mortgage borrowers.

The Council of Mortgage Lenders (CML) has become increasingly concerned aboutrepparttar 149292 ability of current and future home-buyers to pay back mortgages inrepparttar 149293 event of changing circumstances. Overrepparttar 149294 past five years,repparttar 149295 CML and its partners withinrepparttar 149296 Sustainable Home-ownership Initiative, have sought to improve this issue. Contributing factors torepparttar 149297 problem include increasing personal debt levels and a less certain economic environment. This has provoked concern aboutrepparttar 149298 sustainability of home-ownership and consumer understanding of financial products, ensuring thatrepparttar 149299 issue of mortgage risk is atrepparttar 149300 top ofrepparttar 149301 agenda forrepparttar 149302 UK Government, industry regulators and public as a whole.

Overrepparttar 149303 last year,repparttar 149304 Sustainable Home-ownership Initiative has debatedrepparttar 149305 most effective move forward to increase home-buyers’ awareness of potential debt and protection from unforeseen events with insurance products, specifically Mortgage Payment Protection Insurance (MPPI). The Financial Service Authority is leadingrepparttar 149306 way to help raise awareness of debt prevention withrepparttar 149307 “Debt Test” initiative.

According to research carried out byrepparttar 149308 Council of Mortgage Lenders, two thirds of recent first-time buyers say that an online debt test designed to help them assess potential triggers of debt and highlight future borrowing risk would be useful.

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