- quote -

main home and second home cannot be more than $1 million ($500,000 if married
filing separately).

If you took out a loan for reasons other than to buy, build, or substantially
improve your home, it may qualify as home equity debt. In addition, debt you
incurred to buy, build, or substantially improve your home, to the extent it is
more than the home acquisition debt limit, may qualify as home equity debt.

As long as you remain within the limits, wherever you can find the cheapest
rates, to serve as a tax a advantage, it really doesn't make any significan
differnce. The home equity line will allow you to use the money only as you
need it.

Home Acquisition and Home Equity Debt afe discussed in detail at the following
URL:

http://www.irs.gov/publications/p936/ar02.html#d0e1667


"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

Although we've been in the house only a year, we spent over $100,000
on the down payment and upgrades during construction, and with
property values up about 30% in this area over the past year we have
more equity than that. Again, our current principal is about $400,000
at 5.5% for a 15 year loan. We can afford the higher payments that an
additional $100,000 loan would amount to.

My question is this: Our bank offers a line of credit, or a standard
loan. I believe the line of credit has variable interest based on
market rates, but allows us to make interest only payments if we need
to for a time. A standard loan would let us lock in a given rate for
the ten year repayment period, but with higher required paymnents.
Again, we have stable income sufficient to make payments.

The bank says that another advantage of a line of credit is that we
can draw against it further in the future for additional needs or
projects, but we have no such plans.

I was also led to believe that we should be able to deduct the
interest as long as we are the usual type of homeowner--which I
believe we are--a single family living in the house as our primary
residence with a plain-vanilla mortgage.

I guess we should just get a standard loan, then?