I .
ity and the
lowe rates d the deductiri1ity In � 20 percent of OODSWDCI',
by oonsolidating all aedit card interest is deductible, only 10
or loan balanc:a using a home percent in 1990 and nothing
equity loan. aftcc that
AmeriC&Jls have between
tflree and me triIIiaa dollars in
equity tied up in their ho
. according to SMR Research.
Lenders realize. the value and
��lIW',as available ttu'ough this
equity. . aIoag with changes
in the tax law that laW)[ real es
tate borrowiDg. has spurted a
boom i ho equity loans.
If you are in need of funds for
major home improvaucots, the
purchase of a second home, col
lege financing for your children,
con olidation of credit card
debt, buying a car, or payment
of sizable medical bills, consider
a home . Joan. Borrowers
like home equity for their
accessibility, flexibility of pur
pose and tax-deductible interest
costs,
C.II
IRSAndH Eq
There i a limit to the amount
of interest you Can de4uct OIl a
home equity loan depCnding on
ho you intend to use tile
money. If)'Ou use a home equi
ty loan to buy, build or substan
tially improve your first or
second home, you can deduct
interest payments on up to
SI,OOO,OOO of debt secured by
your home (S500,OOO for mar
ried couples filing separatley).
For example, if you purchase a
S1,5OO,000 home and financed
S1,2OO,000, you may deduct in
terest payments on $1,000,000;
interest on the remai ing
$200,000 is considered personal.
interest;
t Is Eq At a later time, suppose you
Equity is the f· market decide to substantially improve
. value of ur and proper- your home, for instance, by ad-
ty OYer d the money ding two new bedrooms and an
owned ,it ( judg- extra bathroom. Assuming, at
ments, d liens, for example). that time,' your ,mortgage debt
A home equity • usually a has dropped from SI,200,OOO to
variable r d mortage S8SO,OOO, yeu can take out a
that is . to a chiding ac- home equity loan for up to
count OI'eYeobankaeditcard) $150,000 and your interest
a line of credi The interest remains fully deductible
_ rate on a bome equity loan falls (S 1,000,000 - S850,000 =
and rises with the market. S15O,(00).
A home equity loan r . If, however, you take ottt a
like this: lender agrees to ex- home ,equity loan for an pur
tend a line of credit based on � other than to buy, build
at a e -to-va ue- su stantra y Improve your
ratio. The formula multiplic home, your interest payments
the amount of equity you have in are only deductible on Sl00,OOO
your ho by 70 or 80 percent (S5O,000 for married couples
For example, usidganBO per- filing separately). for example
cent multiplier, if the fair if you have an unpaid loan
market value of your home is ap- balance of S160,OOO on your
praised t$250,OOO and you still home, which is valu-ed at
have S5O,000 left to pay on your S300,OOO, you have equity of
mortgage, the equity you have in $140,000. If you take out a home
your bome i S2OO,OOO ($250,000 equity loan for S110,000 and use
-S5O,000 = S200,OOO). There- the money to buy a cr and travel,
fore, the most you could qualify you may deduct interest on
fo is 160,000 ($200,000 x 0.8 = $100,000; the' other $10,000 is
S160,000). considered personal debt aDd .
TIIis line of credit may be subject to difference deduc
available to you from five to 15 ti>ility guidelines.
yCars. Once it is approved, you Under a grandfathering
can imply write a check from prevision, interest on home You should be e to obtain.
your account up to the maxi- equity loans outstanding before specific iDformatioo from your
mum. A home equ�ty loan does October 13, 1987, remains fully iender. As to see doaImenta
not amortize like a fmed- or ad- deductible if qualified under the tion descri>ing the details of the
justable-rate mortgage, so you old limits. To the extent that it loan. If you have any problem
. can tap an repay the mo ey � exceeds the new limi interest understanding the terms and
whenever you ant. As you on .amounts borrowed on or conditions that are outlined,
make payment on the outstand- .after October 13, 1987 is taiktdyourtax.advisor,fioancial
. balance, you inaease generally treated as consumer consultant or real estate protes
the availab credit, up to 'your interest expense and will . sionaL
F���r��a��lim� ���d���_I_�_i_ts_� __ � __ ��. __ �_�� �
T. ere m y be minimum J LYNCH
wauaClr1rwa1 fee and there usual- •
lye an l.maiDteoancefee. & ASS'OCIATES
Home equity loan rates are
usu Uy vari ble - presently
boYering between 10 and 21 per
cent, In late 1988, mortgage
rates r between � percent
(for di ble rate mortg'ages)
and 11 percent (for 3O-year
fixed-rate mortple ). Con
typically carry in
t r of 7 to 20 percent
C erest 0 these loans' not
fully Ie under the
tax ). In f ct, you.might"
decide to take' dvaDtage of the
Lou UM"ClIa'IIDOIIIS
There are factors of a home
equity loan to 00DSider t �e
not built into other loans. Com
pared to consumer debt,
defaulting on these loan pay
ments may not 0DIy jeopardize
your aedit rating. but you 'may
risk ing your home.
Another one of hidden
caVe. of a home equity lop is
that interest rate may rise
r pidly and steeply. Clleck to
see tha your lender offers a cap
against rising interest rates. If
you are averse to s ch risk, you
may waat to consider refinanc
ing your bome at a fixed rate in
stead of taking out a home equi
ty line of credit,
Other things yo ould ex-
plore before taking out a ome
equi loan:
- The benchmai' to which
interest rates -are- tied. Home
equity loaD rates are usually
based on the prime rate plus a
margin of one or two percentage
points. I
- The length of the paybaCk
period. Usually at the end of the
period during which you can ac
cess funds, no more money can
be borrowed and the outstand
ing balance of the loa is
cdulcd for ... {cpaJJDCot over
periods which vary be 10
and 40 years.
- Withdrawal minimums,
Many den set minimums of
S2SO to SSOO, but J some lenders
catry no minimum.
.; Closing costs. The charges
for closing usually run from
S200 to $400.
- Penalties for early repay
ment. Most lenders charge DO'
penalty. "
- Origin tion fees. The
usually range between two and
three percent of the loan. _
- Application fees. These
fees can range I (rom SI00 to
S35O.
Insurance Planners and Busines Consultants
We provide pJ'OlllPl professional rvice
* Endo�ntFu�n
ssuhlace * Financial Plan
Plannina * Employee Benefi
o II - 883-8777
* Retire
Suite 2205 Cadillac To er Bui�
Detroit. Michi 48226
Serra s,.dlClla-
�_, Coarte d
ea. alW I freela artist: Nationally
renown homeless activist· • ch Snyder had charged
that James Earl Reid, a Black Baltimore sculptor'
has been blinded by dollars. Reid, on the other hand,
has said "the real gree.. on Snyders . de .. What
theytre battliDg <M%. rights to reproduce a life
sized sallptor of a h family (dubbed -rhird
World America"), that Reid created for Snyder'
community for Non-Violence in Washington, D.C.
Reid, who donated his services,· fighting for the
right to profit from reproductions of the work, com-
. missioned by a corporate sponsor on behalf of
Snyder'$ Center. Corpo tions maintain they should
control works they commission. Freelance artists in
sists that millions are at risk. A decision is expected
in June. -
Ma'ferlck Black Designer Patrie Kelly to •
Ia a Oft dOl" line: Large multicolored
buttons, buttons made of real dice, and stuffed teddy
bears affixed to 1yaa body dresses are the mark of
.designer Patrick Kelly, a Vicksburg, Mississippi na
tive whose rise in today's fashion industry has been
meteoric. His collection averages in the SOO-6OO
price range, and some of his favorite clients include
Princess Diana. Next year, he is said to be offering a
secondary collection called ·Patri Kelly Loves
You,''4Uld at half the price �:S:rimary collection,
Faet i Kelly has praYeD If to be quite the
businessman He is the first American. to be ao
cepted into the Chambre S�dicale, a federation C?f I
top Paris designers. This �, estimates are hIS
wholesale volume will top .� million. So in�1e
is Kellys own rags-to-riches story, that on I_Us �t
recent visit to Los Angeles, e took a meeting with
a film producer 0 discuss a p oject based on his own
life story. . ...
Dress Stars to dollar? As a top Hol-
lywood stylist, Cecile Parker specialized in creating
a total celebrity 100 for clients such as Janet Jack
son, Natalie Cole, Karyn White, MOO Howard, ef
frey Osbourne, �d has 0 occasion Sylveste� Stal-
lone and Neil Diamond, mostly for public ap
pearances form Iive·TV to promotions, even !oter
views. Said Parker, "it's not so much tha they dod'f
dress wel� but they have other things to Worry
about," And for a fee of aboul.S100 per hour (with
three-hour minimum), Parker rcorganius closets �
o der to assess needs, ventures out on shQpping ex
peditio (searching out the latest from �igners'
like Patrick Kelly, Ralph Lauren, ValentinO, and .
Donna Karan), a.nd even suggest hair tyl.e and _
makeup for a total 100 matching personality and
lifestyle. As far cost, arker .says "most celebrities
don't 100 at . & ." P t.. __
cost. Whatever they want; they'll pay lor It ar.u
goU into thi line of work quite by fluke. While wor .
as a fashion coordinator and assistant manager at YYeS
St, Laurent boutique she put together outfits for other
tylists, before realizing she was doing their wor and
could e a Rretty penny doing it for herself. Top
tyiGts earn up to S100,000 per year.
,
C Oa FCC S to I :A
federal appeals court had deemed that feder I ruled
giYiJil8 minorities preference in the purchase of "dis
tressed" radio d TV stations. A panel of the us.
Court of Appeals said the" Federal_ �mmunica�D
Comm ssion's "distress sales ndea, ch aIIo quick
a'. reduced rates of defunct' or desen&an-chised
stations to minor· ies, violate the equal protection
proVisions of the F"tfth Amendment to the Constitutioa,
ling that there no indication the FCC "sought to .
employ r ce neutral programs to aid miDori· before
resorting �o a racial set-aside."
• I
,
. _ .