I paid off my condo with a personal loan, good rate, and now pay interest on that loan. Was I stupid or does this loan count as a mortgage?

Forum|Forum|6 years ago
July 5, 2020
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rjs

Level 15

A personal loan doesn't count as a mortgage because it's not secured by your condo.

Carl

Level 11

No, the interest is not deductible. In order for the interest to be deductible, the loan must be secured by the home. A personal loan isn't secured by anything. So interest on your personal loan is not deductible.

Opus 17

Level 15

Whether it was stupid or not is a matter of perspective. If you didn’t pay enough interest to itemize your deductions, then the only question is did you get a better interest-rate. Even with itemized deductions, that amounts to a 20% or so subsidy of the interest-rate. So a 5% mortgage would have an effective rate of 4% after the deduction. If you got a better rate on the personal loan, then you’re still ahead. Having a personal loan instead of a mortgage also means that you don’t have to escrow your property taxes, which might be of some advantage to you.

Anonymous

Did your banker know that you were taking out a personal loan to pay off a mortgage? if so, he/she did you a great disservice. I'm surprised that you couldn't get a better rate on a mortgage (secured by real estate) than on an unsecured personal loan. Can you refi the personal loan with a mortgage and thus make the interest deductible? don't think so. for the interest to be qualified residence interest (deductible as mortgage interest) the loan must acquisition debt - debt incurred to acquire, construct or substantially improve your main or second home. paying off a personal home. paying off a personal loan would not be acquisition debt.