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
Reply | Reply to Author | Forward | Print | Individual Message | Show
original | Report Abuse

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..

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
Reply | Reply to Author | Forward | Print | Individual Message | Show
original | Report Abuse

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..

There are points and fees associated with a lot of the home equity
loans, additionally reducing the actual savings realized by deducting
interest on a small balance.

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
Reply | Reply to Author | Forward | Print | Individual Message | Show
original | Report Abuse

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..

"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
Reply | Reply to Author | Forward | Print | Individual Message | Show
original | Report Abuse

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.

Bill McKee wrote:

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



It's a home EQUITY loan. Not much different than a refinance based on
the CURRENT value of the home where cash is taken at the closing. Where
did you read that?

http://www.irs.gov/publications/p936/ar02.html#d0e2069
Explains debt limits for interest.

"Dan Krueger" wrote in message
.net...
Bill McKee wrote:

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

It's a home EQUITY loan. Not much different than a refinance based on the
CURRENT value of the home where cash is taken at the closing. Where did
you read that?

"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.


Of course you should not buy a boat unless you can afford the payments. The
point though is that unexpected things can and do happen - layoff, serious
illness, etc. If your boat is on a home equity loan then your house is at
risk. If it's on a separate loan then the house is not at risk.

If the boat qualifies as a 2nd home, tax savings can indeed be large. For
example, on a $100,000 loan at 6% the first year tax savings will be about
$2100 for someone in the 35% bracket (combined federal and state).

--
Peter Aitken

http://www.irs.gov/publications/p936/ar02.html#d0e1821

See Part II: Limits on Home Mortgage Interest Deductions

Maybe I'm too tired to find it. What it say? I didn't see any
restrictions.

wrote:

http://www.irs.gov/publications/p936/ar02.html#d0e1821

See Part II: Limits on Home Mortgage Interest Deductions