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