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Is a home equity loan the same as refinancing?

 
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1 Reply
LeeM
New Member

Is a home equity loan the same as refinancing?

Not really. Refinancing modifies the terms of your original loan. But the interest is probably still deductible.

A home equity loan is a type of loan in which the borrower uses the equity of his or her home as collateral. The loan amount is determined by the value of the property, and the value of the property is determined by an appraiser from the lending institution.You can still deduct the interest on a home equity line, with the below qualifications.

  1. If you take out a home equity loan, your interest payments may qualify for a deduction in addition to your mortgage interest. To qualify, you must have obtained the loan after Oct 13, 1987 and it must also be secured by your home.
  2. For tax purposes, only the balance of the loan that is the smaller of $100,000 or your equity in the home qualifies for the interest deduction. Your equity is equal to the amount you could sell the home for minus the amount you still owe on the mortgage.
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