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mortgage vs. equity line of credit

Customer Question
I am in the process...
I am in the process of selling a home for $595,000 that I owe $185,000 on. I recently purchased a floating home for $419,000, financed by a $200,000 equity line of credit at 4% and a mortgage of $219,000 at 7%. I would like to pay off the latter due to it’s high interest rate and make monthly payments on the equity line of credit. My question is, Can I do this and still deduct interest like regular mortgage payments at taxd time?
Submitted: 13 years ago.Category: Tax
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Answered in 11 minutes by:
10/7/2004
Tax Professional: T. R. Miller, The SunTaxMan, Public Accountant , Tax Preparer replied 13 years ago
T. R. Miller, The SunTaxMan
T. R. Miller, The SunTaxMan, Public Accountant , Tax Preparer
Category: Tax
Satisfied Customers: 148
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As long as the equity line of credit is secured by the home - which makes the loan a Home Equity line of credit (this makes the interest Home Mortgage interest for which you will receive a Federal Form 1098 after year's end), this is fine. There are only two potentials that come to mind:


 - the loan cannot be for more than the fair market value of the property on which the loan is taken.


 - you can use Home Mortgage Interest on two properties (primary and secondary residence)(but ONLY two) as long as the properties have facilities for sleeping, bathing and cooking - and I would assume your "floating home" so qualifies.

T. R. Miller, The SunTaxMan
T. R. Miller, The SunTaxMan, Public Accountant , Tax Preparer
Category: Tax
Satisfied Customers: 148
Experience: 30+ years in Public Accounting and Tax Preparation
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