Re: Tax advantage of equity on home? - Posted by JPiper
Posted by JPiper on November 29, 1998 at 10:01:33:
Your tax question, in my mind, should be addressed to your CPA, so that it may be answered given your personal circumstances.
If memory serves, and it may not, the tax deduction on a mortgage on your personal residence is limited to your cost basis. Please check this with your CPA. Further, mortgage interest deductions on your personal residence should be viewed in light of the existing standard deduction. Mortgage interest only takes on value to the extent that it exceeds the value of the standard deduction. This analysis can’t be made without knowing your personal circumstances.
Personally, I would prefer to finance a rental property directly than through an equity or credit line. If I purchased a property using the equity or credit line, my preference would be to refinance to take the property off that credit line, thus freeing the credit line for additional purchases.
When you think about it there typically shouldn’t be much of a discount for all cash versus giving the seller cash obtained via mortgage. It’s still cash. If you were preapproved by a lender you’re ALMOST like a cash buyer. However, in terms of motivated sellers, a cash purchase has the advantage of SPEED…the ability to close quickly within days. None of the typical delays associated with dealing with lenders such as the time for appraisal, underwriting, etc. While these delays don’t have to be particularly significant, to a motivated seller they might be. In any case, the terms “cash” can take on an importance in a seller’s eyes that can result in a more significant discount than probably should be warranted. It’s worth using to your advantage.