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Buying condo: New loan vs. borrow on other property?

White, multistory condo building with mountain and ocean views.

Hillside condos in Hawaii. (Photo: Flickr/z2amiller)

Buying condo: New loan vs. borrow on other property?

March 20, 2013

Q: I currently own a house and a duplex I rent in Colorado. No mortgages. I want to buy a condo in Hawaii that will be considered our primary residence. Is it best to take a loan on the duplex for funds to buy condo, or should I just get a loan on the condo?

A: Currently you can deduct mortgage interest and real estate taxes, if you itemize your deduction. You can also deduct these expenses on your Schedule E for a rental. I would go ahead and get a loan on the condo itself, because the rate will be lower, as it is for a primary residence.

The interest rates on loans on property rental are higher. All the same expenses are deductible regardless of which property secures the loan. It will be easier and cheaper for the primary residence loan than it would be for investment-property loan.

-- Answer from Meg C., an accountant on JustAnswer.

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