The Attractive Tax Break for Home Loans
So, youve decided on the house, youve researched your mortgage product options, and you know which product you need. Have you taken into consideration the tax advantages that are being touted as an attractive benefit of the interest only loan?
No, you havent. Nor have very many of the consumers out there shopping for mortgage financing. The impact their mortgage might have on their tax return, hasnt crossed their mind, until they read the ads from the mortgage companies that are advertising the interest only loan option. Wow, John Q. Consumer says, didnt realize it would be such a great tax benefit, sign me up! Do you suppose hes really going to benefit from an interest only loan, when its time to file his tax return?
Probably not, nor did he stop to even think about the situation. The plain fact is, many consumers assume these ads are gospel, especially since theyre being run by a mortgage company, they must tell the truth. And they do, just not the truth as it applies to every situation. Every situation in this case, being the average consumer shopping for a mortgage loan, is probably not going to get that much benefit from the tax deduction that comes along with their mortgage interest payments. Not enough to justify the equity theyre giving up in return. Or the years of extended mortgage payments when its time to refinance because they cant afford the larger payment of principal and interest.
How do you determine if you have an attractive tax break? What determines attractive at your house? At mine, any form of a refund warrants the term attractive. Do these loans increase your refund? On average the increased refund dollar, based on the itemized deduction portion of the return, is so small it doesnt even warrant a measure. Many of these mortgage companies play on the ignorance of the public at large, especially when it comes to their tax situation. This is simply because the vast majority of consumers have no way to affirm or deny the claim. So, is there an attractive tax break waiting on the consumer that uses the interest only loan financing? Probably not.
The interest only loan and the amount of interest you can deduct on your tax return are one and the same; the concern for the average consumer is the total dollar value they get to take off their tax return. Quite often, the deductions for the consumer arent enough to contribute to the bottom line, or the adjusted gross income. Higher dollar amounts mean a higher possibility of a greater deduction.
That would be the only advantage to the interest only loan as far as the taxpayer is concerned, unless they use the money saved from the interest only loan to fund a 401k, an IRA, or an MSA (thats a topic for a completely different paper). The interest only loan is sold to the consumer as a way to afford more house, pay off credit card debt, or provide a means to fund a savings of some kind, and thats true, it can be used for that purpose. And if youre considering paying off those high interest credit cards, the interest youre charge on the interest only loan is deductible, while the credit cards are not; just make sure you dont turn around and use those credit cards again, putting yourself right back where you started from, just with more interest and less house equity.
The interest only loan is a great tool, when used by the right people, in the right situation. For the average consumer and long-term homeowner, unless you think a better deduction on your tax return is worth the forfeiture of equity in your home, youd better think twice before financing with an interest only loan option.
John Williams writes about interest only home loans
What Makes Home Equity Loans So Attractive?
A home equity loan is a popular way to borrow larger amounts of money from a lending institution using your home as collatera...
I My Coffee Break; Scientifically Speaking You are Correct
Why is it that science keeps doing research and telling us what we already know? It seems that taking a coffee break allows t...
Low Rate Home Equity Loans - Five Questions and Answers
Low rate home equity loans are an attractive option for millions of Americans. Home equity loans are based on the equity or v...
My Comeback To The Gym: Why Didn’t I Lose My Strength?
Yesterday, I made comeback to the gym after a 16 day complete break (no weights, cardio, nothing!). Also, in those 2 weeks, ...
Home Equity Loans
A home equity loan is one of the various types of home loans available. It is a loan that can be made to borrow money by pled...
ISA Equity Loans Versus Flexibile Equity Loans
ISA equity loans are loans that come with financial vehicles. In other words, if you have an interest only loan, and select t...
Home Equity Loans: Showing The Advantage Of Equity
So, do you want to avail a loan to meet your financial needs? Do you want to get the loan with better terms and conditions? D...
Lesser Known Facts About Home Equity Loans
Refinancing your debt via a home equity loan shifts your debts loan to your home. The flip side to such a move is that your h...
No Interest California Home Equity Loans
It is possible to find a no interest California home equity loan even if the market is seller strong, as a lot depends on the...
Home Equity Loan Rates
Interest rates have been steadily increasing over the last twelve months. This reflects the upward trend of the prime rate, w...
Guide For Student Loan Consolidation Advice
Students, who cannot afford their monthly payments, can now make their debt repayments more manageable through student loan c...
Home Equity Loans: An Opportunity To Evaluate Your Home Equity
With home equity loans, you can finance home improvements, your childs education or consolidate your debts at very reasonable...
New Hampshire Home Equity Loans Using a Home Equity Loan to Pay College Tuition
New Hampshire is home to many great colleges and universities. Unfortunately, the state also has some of highest tuition cost...
Guaranteed California Home Equity Loans
In California, the property market fluctuates, as it is an earthquake prone area. After every major earthquake, many people d...
Home Equity Loans Offer Options to Choose From
As the name suggests, home equity loans are loans that involves home equity as collateral. Home equity is the market value of...
Florida Mortgage Rate Refinance
Florida offers some of the lowest refinancing rates on the market. So if you wish to refinance your home mortgage, a Florida ...
Best Home Equity Loans - How To Choose Them
There are several decision points in choosing the best home equity loans that will suit your needs. The first hurdle is to c...
Home Equity Loans Can Also Be Refinanced!
Lower interest rates and monthly home equity loan payments can make cash available for other usage or make debt more manageab...
Bad Credit Loans Based On Equity!
Bad credit loans based on equity can provide the money needed for many different purposes. Basically there are no pre-defined...
Home Equity Second Mortgages
Secured loans play a crucial role in home equity second mortgages. You may have one or more secured loans in addition to your...