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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 2608
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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I am considering helping my brother buy a house. He needs to

Customer Question

I am considering helping my brother buy a house. He needs to sell his house now to be able to buy the one he found, his current house isn't listed yet (will be soon!!). The credit union he got prequalified at said if he had a cosigner on the loan, it would probably be approved. My home is paid off. If we decide to take this venture, would it be better to cosign on the loan, or for me to get an equity line of credit on my house? What other details do you need? Thanks, Linda
Submitted: 6 months ago.
Category: Finance
Expert:  ABC Accounting Group replied 6 months ago.

Hi. Great Question. If you cosign the loan and he defaults, you will be responsible to pay it off.

You may be able to deduct the interest on the equity line of credit. To deduct the interest on the equity line of credit, the interest needs to fit into one of the three categories:

The three categories are as follows (#3 would include home equity line of credit):

  1. Mortgages you took out on or before October 13, 1987 (called grandfathered debt).

  2. Mortgages you (or your spouse if married filing a joint return) took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2016 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

  3. Mortgages you (or your spouse if married filing a joint return) took out after October 13, 1987, that are home equity debt but that are not home acquisition debt, but only if throughout 2016 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).

Expert:  ABC Accounting Group replied 6 months ago.

Let me know if you have any questions.

Customer: replied 6 months ago.
I was reading that mortgage interest paid by a cosigner may be deductible as long as it was paid directly to the mortgage company, also read about percentage paid by each party. What about that?
Customer: replied 6 months ago.
3 in the information you sent, does that mean you can only deduct the interest related to $100,000 of the home equity debt? I had a home equity line of credit in the past that I used to help my parents purchase a house, if I recall correctly, it was $140,000 and I deducted all of the associated interest.
Expert:  ABC Accounting Group replied 6 months ago.

Hi. For the cosigning -

You can get the deduction if you co-own the home and if you pay the interest directly to the lender.

Expert:  ABC Accounting Group replied 6 months ago.

Hi. Here is the IRS publication on the home equity line of credit (halfway down on the page):

https://www.irs.gov/publications/p936/ar02.html#en_US_2016_publink1000230008

Customer: replied 6 months ago.
I am thinking I need a tax person to answer my questions.
Expert:  ABC Accounting Group replied 6 months ago.

This is a tax person. If you are not satisfied, I will transfer you to another tax expert. Thx.

Customer: replied 6 months ago.
I think I am looking for more specific advice than you can give me here. Sorry to bother you.