Mortgage and Refinancing Information Channel:
We would like to thank the local libraries, schools, and universities for recommending students to visit us when doing research on any of our information topics.
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.
MORE RESOURCES updated Tue. January / 19 / 2021
What are the hidden costs of refinancing a mortgage? Fox Business
Mortgage refinance rates continue hitting record lows – here’s how to get the best deal now - Fox Business
Mortgage refinance rates continue hitting record lows – here’s how to get the best deal now Fox Business
3 Mortgage Refinance Strategies to Consider in 2021 The Motley Fool
What is a mortgage prepayment penalty fee, and how does it work? Business Insider
What Is A Debt Consolidation Refinance? | Pros And Cons The Mortgage Reports
Racked Up Holiday Debt? Refinancing Could Help You Pay It Off The Motley Fool
3 Options for Financing Home Improvements in 2021 The Motley Fool
Can You Refinance A USDA Loan? | USDA Refi Options The Mortgage Reports
PropertyGuru Tackles Top Home Loan Refinancing Misconceptions Among Singaporeans in New Research - Taiwan News
PropertyGuru Tackles Top Home Loan Refinancing Misconceptions Among Singaporeans in New Research Taiwan News
Mortgage refinance: Everything you need to know Fox Business
Buying a Second Home: What to Do and How Much It Costs Credible News
How to decide if you should refinance your mortgage Fox Business
How to refinance your mortgage Fox Business
Who's exempt from the new mortgage refinance fee? Fox Business
Everything You Should Know About The New Mortgage Refinancing Fee That Goes Into Effect Dec. 1 - Forbes
Everything You Should Know About The New Mortgage Refinancing Fee That Goes Into Effect Dec. 1 Forbes
How do I get the most out of my mortgage refinance? Fox Business
Today’s mortgage refinance rates hold steady for third consecutive day | December 11, 2020 - Fox Business
Today’s mortgage refinance rates hold steady for third consecutive day | December 11, 2020 Fox Business
Today’s mortgage refinance rates mixed — one key rate drops while two hold steady | December 15, 2020 - Fox Business
Today’s mortgage refinance rates mixed — one key rate drops while two hold steady | December 15, 2020 Fox Business
4 ways to get lower mortgage refinance rates Fox Business
10 things to know before refinancing your mortgage Fox Business
A record 19.4 million homeowners can now save big on a mortgage refinance, as rates hit another new low - CNBC
A record 19.4 million homeowners can now save big on a mortgage refinance, as rates hit another new low CNBC
The best mortgage refinance lenders of January 2021 Business Insider
Refinancing your mortgage? Don’t make this mistake Fox Business
Today's mortgage refinance rates stay low with the election underway | November 3, 2020 - Fox Business
Today's mortgage refinance rates stay low with the election underway | November 3, 2020 Fox Business
Today’s mortgage refinance rates climb upward — though one key rate holds steady | October 23, 2020 - Fox Business
Today’s mortgage refinance rates climb upward — though one key rate holds steady | October 23, 2020 Fox Business
Thinking of refinancing your mortgage? Do your homework before you jump in. - The Philadelphia Inquirer
Thinking of refinancing your mortgage? Do your homework before you jump in. The Philadelphia Inquirer
Complete Checklist of Mortgage Refinancing Requirements Credible News
10 tips for getting the best mortgage refinance rates Business Insider
How often can you refinance your mortgage? Fox Business
How to refinance your mortgage without closing costs Fox Business
When should you refinance your mortgage? Fox Business
Today's mortgage refinance rates hold steady at unprecedented lows | October 16, 2020 - Fox Business
Is now a good time to refinance your mortgage? Fox Business
Should You Lend Your Kids Money for a Home Down Payment? The Motley Fool
How to get a low-cost mortgage refinance Bankrate.com
How to Refinance Your Home | Home Lending Chase News & Stories
Today’s mortgage refinance rates keep sinking, reaching 37-day low | November 13, 2020 - Fox Business
How much can you save by refinancing your mortgage? Fox Business
Now Is A Great Time To Refinance Your Mortgage - New Refinance Fees Delayed Until December 1 - Forbes
Mortgage refinancing is about to get more expensive Pittsburgh Post-Gazette
No-Closing-Cost Refinance: Is It Right for You? NextAdvisor