I'm considering doing a cash out refinance to lower my rate and fund a few home improvement projects. some of them are larger and clearly improve home value (back yard landscaping), but some are smaller and wouldn't necessarily add much home equity (add a sink to the laundry room.) I know the 2017 tax reform limited what you could do with the cash out money and still be able to deduct your mortgage interest. I'm trying to figure out 2 things... 1) How strict are they about defining what qualifies under the must improve home equity rule? Do I really have to demonstrate an equity bump for all $ spent? 2) What do I do if the projects end up costing a little less than I took out? (~$1K - $2K) Can I just pay the money back to my principal and call it good? I'm trying to decide if I want to do this and not screwing up and being unable to deduct my mortgage interest is part of the consideration. Thanks!
... View more