Posted by chris on June 14, 2000 at 04:18:47:
The repayment of a debt from the proceeds of a new loan using the same property as security. We also consider the current owner’s placement of financing on a property that is not financed as a refinance transaction. (Source: FNMA Selling Guide, Glossary)
HOME EQUITY LINE-OF-CREDIT LOAN
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her discretion, up to an amount that represents a specified percentage of the borrower’s equity in a property. (Source: FNMA Selling Guide, Glossary)
Joint tax filers can deduct all the interest on a maximum of $1 million in mortgage debts secured by a first and second home. The maximums are halved for married taxpayers filing separately.
You can’t use the $1 million deduction if you pay cash for your home and later use it as collateral for an equity loan.
Equity Loan Interest
You may be able to deduct some of the interest you pay on a home equity loan. However, the IRS places a limit on the amount of debt you can treat as home equity debt for this deduction. Your total home equity debt is limited to the smaller of:
$100,000 for a married couple filing jointly ($50,000 for those who file separately), or
the total of your home’s fair market value–that is, what you would get for your house on the open market–less certain other outstanding debts against it.
The IRS rules about the home equity loan interest deduction are complicated. IRS Publication 936 explains the details.