"Mark Bole" <makbo[at]pacbell.net> wrote in message
news:nPFKg.23580$gY6.76[at]newssvr11.news.prodigy.com...
- quote -

Thanks for the clarification.

704set wrote:

[...]
- quote -

No, that would be a home equity line of credit (HELOC). There are some
subtle distinctions.

Home equity loan = 2nd mortgage, fixed amount borrowed up front,
typically at a fixed rate, paid off just like a first mortgage.
Typically used for home improvement project, some other large, one-time
expenditure, or sometimes to allow 100% financing of initial purchase
(that is the buyer's "down payment" is actually a 2nd mortage).

HELOC = variable balance up to approved limit that can be raised or
lowered depending on how much the borrower chooses to draw or pay back
at any given time. Typically variable rate, interest-only payments
allowed until end of term, typically ten years, when either a balloon
payment is due, or conversion to 2nd mortgage if lender allows.

Then, there are hybrid products, essentially a HELOC where you can
choose to draw a specific amount at any time and designate it as a
"fixed rate partition" which then becomes locked in at a fixed rate
while the rest of the balance remains variable line of credit.

-Mark Bole

Dee wrote:

[...]
- quote -

Yes, it's actually buried near the back of Pub 936. Generally a 90-day
time window, with additional rules and exceptions. Various time windows
also apply to financing of home improvements as well as acquisition.

-Mark Bole

Mark Bole <makbo[at]pacbell.net> wrote in
news:WliKg.585$MF1.86[at]newssvr25.news.prodigy.net:

- quote -

In reading Pub 550 and 936, the IRS makes a distinction between home
acquisition debt and home equity debt.

If I were to acquire a new home, paying cash at the closing, could I then
turn around and get a mortgage on the house and have that be designated as
home acquisition debt? Is there a time limit or window in which you must
obtain a mortgage when purchasing a house for it to be considered
acquisition debt by the IRS?

Thanks, Dee

"Disney Anna" <xyz[at]xyz.xyz> wrote in message
news:8%iKg.7612$q63.3853[at]newssvr13.news.prodigy.com...
- quote -

This is not necessarily a home equity loan. A home equity loan usually
involves a line of credit that you can draw on. You can also pay down the
balance or borrow against the credit at any time. It is usually a floating
rate.

Since he has no current mortgage, he can get a first mortgage on the house.
He would receive a check for the mortgage balance. He could also lock in a
fixed rate for the life of the loan.

704set

Disney Anna wrote:
- quote -

Good point. Unless there is an immediate expected return materially
larger than the cost of the loan, it makes no sense to borrow the
money. If the OP wanted out of the home, he might consider a reverse
mortgage. I haven't looked at one, and I don't know how the time and
size of payments varies with age of the owner.

"woessner[at]gmail.com" <woessner[at]gmail.com> wrote in
news:1157211643.446190.201490[at]i42g2000cwa.googlegroups.com:

- quote -

Thanks, Bill. Reading Pub. 936, it looks like this type of mortgage is
treated as "home equity debt" and, as such, limits the mortgage interest
deduction only to interest on the first $100,000 of debt. However, it does
look like amounts above that can be deducted as investment interest
expense.

Dee

Dee wrote:

- quote -

If you have good credit and can document current stable income, and the
property is owner-occupied, it should be a piece of cake.

Banks make money on mortgages -- they want your business.

-Mark Bole

"Dee" <d[at]d.d> wrote in message
news:Xns983265ECB458Dddd888[at]ispnews.usenetserver.com...
- quote -

This is called a home equity loan. If you're taking out the loan to invest
the money elsewhere, you need to take a good, hard look at the
risks/rewards. Can you get a better return with the investment you're
thinking about versus what your house will appreciate? Are you okay with
possibly losing your home if your investment declines or if other
circumstances (job loss, illness, etc.) interrupt your income?

Personally, I would never use a home equity loan for another investment, and
I don't recommend it to others, either. A better plan is to take the money
you would be paying back to the loan company, and invest that on a monthly
basis. It's cheaper, too -- no interest.

woessner[at]gmail.com wrote:

- quote -

Good point. However, even if it is not deductible as qualified home
mortgage interest (which does after all rely heavily on "acquisition
debt"), it should still be deductible as investment interest expense
(given that the OP stated the loan proceeds would be used "to invest
elsewhere"). See IRS Pub 550.

In this case, you would want to keep the loan proceeds separate from
other personal funds so that you could clearly link the investment
income to the investment interest expense.

-Mark Bole

- quote -

The country is rife with mortgage brokers falling over themselves to
lend you money. From the brokers' perspective, the fact that you
already own the property is a plus (because you're probably in a better
position to pay them back). Other than that, your situation is no
different to the brokers than someone using a loan to purchase a house.
You want to borrow money from them and you're going to secure it with
your property.

However, it's worth pointing out that, to the IRS, the situation is
different. At the very least, any points you pay on the mortgage will
only be deductible ratably. But as long as this is a "qualfied home",
I think you'll probably be able to deduct the interest. See IRS
Publication 936 for details.

http://www.irs.gov/publications/p936/

--Bill

It seems most mortgages are obtained in order to purchase a property. What
if you already own a house free and clear and want to pull out that equity
to invest elsewhere? In other words, how easy or difficult is it to obtain
a mortgage on a property that is owned free and clear?

Thanks, Dee