Home Equity Loan or Mortgage Loan?
I'm buying a second home that will cost me 340K. I am putting down 50% in cash. So adjectives I need to do is finance 170K. If I take a Mortgage., there is a big closing cost, if I get a Home Equity Loan, no closing cost, and low interest (variable) and thus lower monthly allowance. The question is, if I default, next to the Equity Loan, (from job loss etc), will the bank steal away both the homes, as apposed to the Mortgage Loan, where they would only filch away the second home
Answers:
The HELOC would be the same as a mortgage. Still a lien on title. If you failure to pay the collateralized home would be in jeopardy.
A home equity loan may own deductabilty limitations for tax purposes that may be different than a home acquirement loan. But if you get in an AMT situation, that may restrict home interest deductions. It also may depend whether it is a 2nd home or investment property.
See http://www.irs.gov/faqs/faq-kw122.html which mentions Publications 936 and 505.
The first mortgage is better for you in many ways. The closing costs are toll deductible, and so is the interest that you will pay. The first mortgage if you do a traditional 30 year fixed rate loan you will pay principle and interest. The HELOC will probably be an interest just tied to prime which is great right now but sooner or later prime will start to increase and put race in panic mode, If the HELOC is on your primary residence. Also you enjoy to be careful how the note and action of trust is written, this will determine if they can take 1 home or both homes. I am working with a couple within Indiana who did the same thing but they be givin' a blanket loan and defaulted on it and now may lose both homes.
Others are correct, get a 1st on the clean home. You will have a large equity position and solitary put the 2nd home at risk if you default...
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Answers:
The HELOC would be the same as a mortgage. Still a lien on title. If you failure to pay the collateralized home would be in jeopardy.
A home equity loan may own deductabilty limitations for tax purposes that may be different than a home acquirement loan. But if you get in an AMT situation, that may restrict home interest deductions. It also may depend whether it is a 2nd home or investment property.
See http://www.irs.gov/faqs/faq-kw122.html which mentions Publications 936 and 505.
The first mortgage is better for you in many ways. The closing costs are toll deductible, and so is the interest that you will pay. The first mortgage if you do a traditional 30 year fixed rate loan you will pay principle and interest. The HELOC will probably be an interest just tied to prime which is great right now but sooner or later prime will start to increase and put race in panic mode, If the HELOC is on your primary residence. Also you enjoy to be careful how the note and action of trust is written, this will determine if they can take 1 home or both homes. I am working with a couple within Indiana who did the same thing but they be givin' a blanket loan and defaulted on it and now may lose both homes.
Others are correct, get a 1st on the clean home. You will have a large equity position and solitary put the 2nd home at risk if you default...
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