What-you-need-to-know-about HELOCs and the new tax reform bill

What You Need To Know About HELOCs And The New Tax Reform Bill

On December 20, 2017, President Trump signed into the law the Republican tax reform bill which went into effect at the start of 2018. With that, a number of changes have been made to our tax code, specifically, home equity loans and lines of credit. In the new bill, you can no longer claim a deduction for the interest paid on HELOCs. So, what does this mean for you?

First, let’s start by defining what a home equity loan is. Basically it’s when a homeowner receives a loan using the equity in their house. The equity is the difference between the home’s mortgage balance and its market value. Homeowners can either take out a onetime loan with a fixed interest rate, or a line of credit which is similar to a credit card with a debt limit based on your home’s equity.

Previously, homeowners who took out a home equity loan could deduct up to $100,000 in interest from their taxes; under the new law, that is no longer the case. For homeowners with available home equity they want to borrow against, they may find themselves at a crossroads. Now that interest isn’t tax deductible, the benefit of home equity loans and lines of credit may be reduced, but homeowners can utilize a different financing option such as a cash out refinance.

A cash out refinance is a way to receive cash for your home’s equity. It works by refinancing your mortgage for more than you currently owe and receiving the difference in cash. Right now, rates are still looking great, and if you’ve increased your credit score or equity in the past couple of years, a cash-out refinance could be a viable option. For more information on starting a cash out refinance, visit refinance.

AmeriSave Mortgage Corporation does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Our Best 2018 Mortgage Tips

Our Best Mortgage Tips For 2018

Are you purchasing or refinancing a home in 2018? Check out our mortgage tips to help you have an awesome mortgage this year!

Tip #1 – Build up your reserve savings

You may have enough for your down payment and closing costs but if the payout depletes your savings, you could still run into some issues. Typically, mortgage companies want you to have a savings fund in case unexpected expenses occur, so your house payment won’t be affected.

Tip #2 – Consider refinancing into a 15-year loan

This is dependent on a number of factors and you should seek financial advice before making this decision, but if circumstances make financial sense, a 15 year mortgage may be right for you. 15-year mortgages usually have lower rates than 30-year mortgages. Although monthly payments will be higher, you’ll be paying more to principal right away than you would with a 30 year loan, and you’ll pay significantly less interest over the life of the loan.

Tip #3 – Live within your means

A good rule of thumb is to buy the home that you can comfortably afford now, not the home that you can afford in the future. What that means is even though your future financial earning potential looks bright, you should still borrow what you can afford based on your current earnings. You can always upgrade your home after your income increases!

Tip #4 – Take advantage of a cash-out refi

A cash-out refi is a home mortgage refinance for more than the amount owed where the borrower is able to keep the difference. This can be a way to consolidate high interest debt with the goal of saving you money in the long run.