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When one talks about a home equity loan used to "buy, build, or improve your home," how does that apply to a home equity loan taken on one's main home and used to buy a second home? Does "your home" mean the home on which you took the home equity loan, or can it mean "your" second home?

With the exception of the treatment of points (and perhaps PMI), the mortgage interest rules are the same for primary and second homes. However, in this scenario you could wind up with a problem of too much debt tied to the primary home relative to its cost and improvements.

See Pub 936.

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