QWe Are Thinking About Getting A Second Mortgage To Build A Garage And Make Some Home Improvements. I Would Like Some Advice.
AA second mortgage allows homeowners to cash in on some of the equity that has built up in the home over time. Some lenders call a second mortgage a junior lien. Getting a second mortgage is like taking out your first mortgage. You will be required to pay closing costs of 3 to 6 percent of the loan value. But you may deduct up to $100,000 of the interest paid on second mortgages. As an alternative, you might consider the home equity line of credit. While traditional second mortgages give you money in one lump sum, a home equity line of credit allows homeowners to use the equity in their home like a giant credit card. Under the current tax system, you can deduct interest paid on home equity lines of credit × loans secured by your principal or second home × up to $100,000. The advantage of the home equity line of credit is that interest is charged only on the portion of the equity you've borrowed against.