Home Equity Loans Can Be Cheaper

Using equity in a home for investments, purchase of a second home, vacations etc. has become commonplace.

If you have an existing home equity line of credit, it may appear to be a simple way to borrow.

And it is simple, but tax-inefficient and very expensive.

There are ways to structure a home equity loan so that interest payments are tax deductible, and so that you only pay interest on the money you are immediately using rather than paying interest on the entire home equity loan.

Someone who takes out $200,000 from their home equity line of credit can pay as much as $14,000 per year in interest. But with proper financial structure, that interest can be reduced to only $3,000 per year.

Your banker will generally not explain how to reduce your interest payments since that reduces their income. And your real estate agent is not qualified to explain how to take advantage of home equity lending options. Rely on a fee based financial consultant to assist you.