|
If
you sign for a home equity loan you are in all effect
signing for a second mortgage. You will be turning your
equity into cash money that you can use for pretty much
anything you want. Many people use this money on things
like their children’s education or home improvements.
One of the things that you need to
understand before you get this line of credit is what
collateral really is. The collateral in this case will
be your property, you will put is up as a guarantee that
you will not default on any of your loan payments. If
you do not make your regular payments according to the
schedule that you agreed to in the contract, then the
lender has the right to seize your home and sell it off
to recoup their loss.
San Diego Home equity loans generally have variable
interest rates rather than fixed interest rates. This
means that your monthly payments will change depending
on monthly interest rates and on how much you have
borrowed. Interest is only charged on the money that you
owe.
The money received
from these loans can be used towards anything you want.
You can fix up your home, pay your bills or even get a
new car. But it is worth noting that like with any loan
this service is not free and it does come with it’s own
set of fees. And just like any other contract you must
be sure to read it carefully. Whatever you do, do not
sign it until you understand it fully and
completely.
Tax
impact
IRS defines this in two ways:
If you have used
your Home Equity Loan to do improvements on your home
than: In most cases, you will be able to deduct all
of your home mortgage interest. Whether it is all
deductible depends on the date you took out the
mortgage, the amount of the mortgage, and your use of
its proceeds. You can use this
figure to see if
you home mortgage interest is fully
deductible.
If you have used
Home Equity Loan to pay off your bills, but not to
improve your property than: The interest would be
deducted on line 10, Form
1040, Schedule A (PDF),
Itemized Deductions. The amount you can deduct
as interest on home equity debt is subject to certain
limitations.
San Diego
Home
Equity Line versus Second Mortgage
|
|
Home
Equity Line |
Second
Mortgage |
|
Tax
Deductible |
Yes |
Yes |
|
Annual
Fee |
Yes (some
lenders may waive this) |
No |
|
Draw money
when needed |
Yes |
No |
|
Fixed
Rate |
No |
Yes |
|
Main : Buy : Finance : Sell : Investment :
Contact
: Mortgage
Calculators 
