Will Your HELOC Be Tax-Deductible?

MoneyTips

Homeowners may see less of a tax break this year, thanks to the Tax Cuts and Jobs Act (TCJA). Beginning with homes purchased after December 16, 2017, you can only deduct the interest incurred on $750,000 of mortgage debt on qualifying residences (primary homes and one second residence). Under prior law, the limit was $1 million in mortgage loan debt with an extra $100,000 in home equity debt.

Can you still deduct interest on a home equity loan or a home equity line of credit (HELOC) under the new law? Yes – but only in certain circumstances.

To be deductible, a home equity loan or HELOC must be used to “buy, build, or substantially improve” the home that secures the loan. In addition, the total mortgage debt incurred after the new law took effect – including the home equity debt – must be at or below the cost of the home and below the new mortgage deduction limit ($750,…

Need Down Payment Help? Consider Shared Equity

MoneyTips

You want to buy a home and have the income to support a decent monthly payment – but you can’t save up enough money for a significant down payment. With home prices and interest rates rising, you’re afraid that you’ll be priced out of the market before you can save up a full down payment.

If you qualify for FHA or VA loans, you may be able to secure a loan with far less than the standard 20% down payment required to avoid private mortgage insurance (PMI). However, you’ll have to borrow more money by definition and will end up paying considerably more in interest over the life of the loan.

A few companies are offering a new alternative for down payment assistance – a shared equity mortgage. With a shared equity mortgage, a third-party investor contributes a portion of your down payment in exchange for a share of the proceeds …