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Deductions & credits
definition of a cash-out refi
A cash-out refinance is a refinancing of an existing mortgage loan, where the new mortgage loan is for a larger amount than the existing mortgage loan, and you (the borrower) get the difference between the two loans in cash. since your paying all cash it can't be a refi as the term is defined. I also do not understand what you mean by using interest gains to offset rental income.
if you pay all cash for the rental property, at closing you'll pay certain fees and cost related to the purchase.
yes, the next day you can take out a mortgage on the rental property and the interest would be deductible but you are likely to incur additional closing costs. many of these are not deductible but would need to be allocated to the cost of the land and building.
using cash to buy the property would result in any income being earned on it stopping. but the next day you have most or all of it back. so what do you do with it? basically, you lose income for one day but also incur one day less of mortgage interest expense.