A home equity loan - or home equity line of credit- is a 2nd mortgage
where your home is your collateral just as a 1st mortgage. You can
spend $10K on Pop Tarts and it's tax deductible. I don't see where
"lying" comes into play. You get a 1098 for mortgage interest and no
one asks, or cares, what you spent it on.

Your point about leveraging your home for a "toy" is valid, but what if
we are talking about only $20-40K for a boat? You pick up the tax
savings and still have a title in your hand. If you couldn't qualify
for a conventional loan you shouldn't risk your home. It's not a last
resort - it's a tax advantage.

Remember that this is about home equity. You could do the same with
refinancing and taking out cash for other uses is never in question.

Dan


wrote:
Dan Krueger May 31, 8:06 pm show options

Newsgroups: rec.boats
From: Dan Krueger - Find messages by
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Date: Wed, 01 Jun 2005 00:06:33 GMT
Local: Tues,May 31 2005 8:06 pm
Subject: Boat Financing
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Peter,


Got a home with enough equity for the boat? If you do that's a great,
tax deductible source of money.

**********

Tilt. If the money is used to buy a boat, the interest will not usually
be deductible on a h.e. loan.
The money needs to be used for education, home improvements, or other
items on a short list of approved expenditures. Nothing stops a lot of
people from lying, of course- but they are liable for back taxes,
penalties, and interest when and if caught.

However, if you take out an actual boat loan the interest on that *may*
be deductible as a "second home" if the boat meets certain minimal
requirements for accommodations and you are not already writing off the
interest on a vacation cabin, motorhome, or etc under the "second home"
provision.

I would say, never, ever, ever, put your home at risk to pay for a toy.
Take out a loan using the car, boat, airplane, camp trailer, whatever
as collateral. If things go unexpectedly to hell, you may be able to
stiff the bank for the payment on the boat or vehicle. It will ruin
your credit, but if there isn't a huge "deficiency" judgment the lender
would have a hard time coming after your house.

When you borrow $400k on a $1mm house to buy a boat, the *entire* $1mm
asset is at risk.
Nobody has figured out how to repo just part of your house. Two years
later when the $400k boat is down to $250k and the $1mm house is up to
$1.2mm, the lender probably won't even have the decency to say "Thank
you very much!" as you sign the deed..