Tax implications of "buying" a mortgage (and having mortgage interest to deduct) vs saving $5,000 mortgage fees and staying with a HELOC

[2105]

My parents got a HELOC on their house to help me buy my house when I was going through a divorce and didn't yet have money separate from my spouse with which to make a purchase.  I am paying my parents' HELOC off, but the rate has doubled in the past 16 months since we signed the HELOC.  My question is, is it better to keep the HELOC with the variable rate (and I can pay extra so that some of the principal is paid down), or is it better to get my own mortgage even though the interest rates are so high these days?  Basically, is it better to get a mortgage on which I would be able to deduct the mortgage interest, which would be about $18,000 next year? Closing costs are around $5,000, so it would basically cost me $5,000 to "buy" this mortgage, and "buy" my ability to deduct $18,000 from my taxes next year.

[Anonymous]

Hello 2105,

Thanks for joining us today. As to your question, from what you shared, it sounds like your parent's HELOC paid for the whole home. Although I can't tell you what to do, if true, a convential fixed rate loan would most likely cost less in the long-run than the HELOC and give you a tax benefit from being able to deduct the interest. Variable rate loans are not wise in this current economy unless you are the one earning it.

I hope that helps.