![]() |
Home Equity Loan - Good Choice for Luxury Purchases?Home equity loans or lines of credit have increased dramatically in popularity in recent years. One of the reasons is that interest rates are at or near historic lows; borrowing money has rarely been more affordable. Another reason is that Americans are enjoying record amounts of equity as home values have skyrocketed in recent years. Given that the loans are affordable and the equity is available, many homeowners are wondering if a home equity loan would be a good way to finance expensive lifestyle items. Would borrowing against your home be a good way to purchase that Dodge Viper you've always wanted? How about that around the world cruise you have always dreamed about? Is taking out a home equity loan for luxury purchases a good idea? As with any financial transaction, there are good points and bad points to borrowing against your home to buy luxury items. The good points are numerous. Unlike a credit card or standard auto loan, a home equity loan offers deductible interest on your tax return, provided that the loan does not exceed $100,000. If you pay taxes in the 28% tax bracket, you are effectively getting a 28-cent rebate on every dollar you pay in interest. That is certainly appealing. The fees associated with a home equity loan have come down in recent years, and the application process is much simpler than in the past. The good points make it seem like a good idea, but the bad points are considerable. Most home equity loans have terms that extend quite some time, typically ranging from 5-15 years in duration. Do you really want to pay for a car for fifteen years? It is quite likely that you'll still be paying for that luxury car long after it has gone to the junkyard. The same applies to that around the world cruise, which will be long forgotten by the time it has actually been paid for. It may make sense to fund a luxury car with a home equity loan if the term of the loan is only five years and you actually plan to keep the car for that long. Otherwise, funding the purchase with a more traditional loan would be a better choice. Of course, if you have already made the purchases and you are maintaining a balance on a high-interest credit card, it might be wise to consolidate your debt with an equity loan. Trading a 20% loan for a 6% loan is certainly a smart move. The best advice for anyone considering funding a luxury purchase through a home loan would be to consult with a tax advisor. ©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a Website devoted to debt consolidation and credit counseling information and HomeEquityHelp.net, a site devoted to information on mortgages and home equity loans.
Today's Mortgage, Refinance Rates: May 26, 2023 | Tired of Rising Rates? Blame the Debt Ceiling Debacle Business Insider The Great Pandemic Mortgage Refinance Boom - Liberty Street ... Liberty Street Economics - Compare Today’s Refinance Rates | U.S. U.S News & World Report Money What is mortgage refinancing and how does it work? Yahoo Finance Today's Mortgage, Refinance Rates: May 21, 2023 | Rates are Flat for now, but Should Drop Later This Year Business Insider How to get a low-cost mortgage refinance Yahoo Finance Should you refinance your mortgage to pay off debt? New York Post Home equity loan or HELOC vs cash-out mortgage refinance Yahoo Finance What Credit Score Is Needed To Refinance a House | Chase Chase News & Stories Total Household Debt Reaches $17.05 trillion in Q1 2023; Mortgage ... Federal Reserve Bank of New York Ask Chuck: How can I ever afford a home? The Christian Post Refinancing your mortgage could save you thousands — here are some of the best refinance lenders CNBC How To Remove PMI: A Complete Guide Zing! Blog by Quicken Loans Compare Current VA Loan Rates | U.S. U.S News & World Report Money How does mortgage refinancing work? CBS News Should I Refinance My Mortgage? - Buy Side from WSJ The Wall Street Journal Here’s how sharply mortgage refinancing has dropped off Yahoo Finance CFPB Launches Effort to Spur New Opportunities for Homeowners ... Consumer Financial Protection Bureau Today’s 30-year mortgage refinance rates hit lowest levels in 15 days | Oct. 28, 2022 - Fox Business Analysis | It Will Pay to Wait to Refinance Your UK Mortgage The Washington Post Small Business Loan Refinance Bankrate.com Why Older People Can’t Get New Mortgages The New York Times VA Refinance Rates - Current VA Loan Refinance Rates Today Business Insider Debt-Ceiling Deal Is Close. Recession And Stock-Market Drop May ... Investor's Business Daily Current 15-Year Refinance Rates Today Business Insider Refinance Closing: An Overview Zing! Blog by Quicken Loans 7 Refinancing Programs for Seniors Total Mortgage Compare Current 30-Year Refinance Rates Business Insider
|