Your Home Equity Line of Credit Ain’t What it Used to Be (Or What It’s Going to Be!)

  • January 7, 2018

Is it time to replace or pay off your home equity line of credit?  Please forgive the hen scratch insertions in the documents I want you to see, but this change is so new that a lot of updating is going on!  The only real advantage for homeowners 62 or over to use the traditional HELOC (Home Equity Line of Credit) as opposed to the government insured HECM (Home Equity Conversion Mortgage Line of Credit) has been the interest deduction that borrowers could take on the monthly payments they are required to make.  Truthfully, that was never a strong argument to begin with because most seniors are in a low tax bracket and the actual cash advantage of writing off a few hundred dollars per month at, say 15% net cash is not necessarily a big deal.  Especially as opposed to not making a monthly payment at all!  But that is all moot now.  That last bastion of (perceived) advantage is gone.  The new tax law eliminates interest deduction on HELOCS.  HELOCS are the most popular loan ever and they have been great for tens of millions of Americans.  But with no more interest deduction, rising interest rates (bank on that!), a limited term and income killing resets looming it may be time to reconsider.  Let’s talk!

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