"Dan Krueger" wrote in message
ink.net...
For a home equity loan (or line of credit) you are borrowing against the
"equity" in your home. They will do an appraisal. The price you paid has
nothing to do with it. That's why they use the word "equity". It's the
difference between the market value and your mortgage balance.

How are you jeopardizing your home if you can afford to make the payments?
This is no different than any other loan. If you can't pay for a boat
loan from XYZ bank, you will lose your boat but your house can't be too
far behind that. It's not about affordability, it's about tax savings.
You can always pay off your home equity loan with a conventional loan but
that wouldn't make any sense. The bottom line is that if you can't make
the payments, you shouldn't be boat shopping anyway.

The live aboard type boat you refer to only matters if it is a separate
loan and you are declaring your boat as a second home. With a home equity
loan, you can buy a canoe, a corvette, and a bag of peanuts if you
qualify. You get a checkbook - literally.

Tax savings can be huge. It could even drop you down into the next,
lower, bracket. Over the term, you are saving thousands of dollars.

I'm not in the biz of selling any type of loan so I am only speaking from
personal experience.

Dan


Bill McKee wrote:
I understand you can only take out up to the amount you paid for the
house as tax deductible amount. Besides, is foolish to jepardize your
home for toys. If you can not afford to pay a separate loan, buy
something cheaper. You will lose the tax deductibility if not a live
aboard type boat, but how much are you going to save taxwise on a $30k
loan anyway?

"Dan Krueger" wrote in message
k.net...

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
this author
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..




But I understand the IRS rules say only hte money up to the purchase price
of the house is legally deductible.