No. of Recommendations: 0
There have been a number of replies warning about having debts secured by your home above 100% of the home's fair market value. Actually, for most people a better number would be closer to 93%--there are expenses involved in selling a house, such as real estate commissions, that have to be paid from the seller's side of the transaction. One may want to keep it even lower--the housing market is cyclical and house prices in specific neighborhoods do go up and down.

A former coworker had purchased a home. A year later she took out a home equity loan to retire about $16K of debt on her credit cards. Since she wasn't on a debt reduction plan (and in fact considered it fair game to live in consumer debt), when she sold her home a few months later, she had both the mortgage and the home equity loan and also had driven up about another $10K of consumer debt on one of her cards. The mortgage balance + HEL balace were still below the selling price, but she had to put about $5K on her other card when she sold to cover sales commissions.

The warning of itemizing has already been mentioned. If I recall corectly, the fraction of the loan that exceeds the equity one has in the place (the fair market value as of that date minus all other debts secured by the property on that date) is not tax deductable for the life of that loan. One could probably get better information on this on the "Tax Strategies" board.
Print the post  


UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.