Use proceeds from vacation property sale used to pay down mortgage on primary residence
I ran a simple scenario to see what happens when the vacation property is sold for more than its mortgage value to see what happens with the excess proceeds. E.g. value of property $100K, mortgage balance $50K. Remaining proceeds after mortgage extinguished: $50K. (No repurchase of another property.)
The $ appear to simply remaine in some undescribed account that does not show on output tables. It is used for consumption later.
I would like to use it NOW to extinguish a primary residence mortgage. Is there a way to do this?
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Sort of. You have to sell and repurchase your primary home in the same year you sell your vacation home. This may result in over taxation and you're have to get clever in that case to give yourself a special receipt (non taxable) to make up the difference.
Best,
Dick Munroe
I did the following...did it work correctly?: I sold the vacation home and sold and rebought the primary res. in the same year as the vacation home at the then current (inflated at inflation rate) price. It appeared to pay off the mortgage. Another factor previously unmentioned was they have rental property that I needed to sell during another year and use the proceeds to pay off remainder of the primary residence mortgage. I did a second change of primary residence in that year and used same procedure rebuying primary residence at that years price. I have not adjusted for taxes primarily because it seems that if I am selling and rebuying primary residence in the same year, there will be no capital gains tax due. Additionally, on the rental real estate, I assume that the machine knows that there may be capital gains,depreciation recapture, etc. and it is automatically taking it from the sales proceeds and then paying down the primary residence mortgage with the remaining funds. Please comment. Thanks.
Yes, the rental real estate should have the necessary bits taken out for taxes.
Best,
Dick Munroe