mhb@magic.DEC.COM (Marc Brown) (09/26/86)
Suppose I own house A costing 100K with a 95K mortgage, and it is being used as rental property. It is now worth 200K. I live in house B costing 250K with a 225K mortgage (and worth 250K). For the purpose of writing off the interest on our car and college loans, I plan to take out a equity loan for 20K. However, because house B has no equity to speak of, the loan is written against house A. QUESTION 1: Does paying off a college loan count as "educational"? If so, why should I need to go to the hassle of taking out a loan against the house in the first place? QUESTION 2: Supposing all 20K were used for the car loan (well, let's say a car, a Cessna, and a month for eating for 2 in Paris), how much would be writeoffable? Clearly 5K (or a bit more since the 100K house has some "improvements"). Can the remaining 15K be used against the 25K equity in house B (purchase price less mortgage)? Or would a second loan against house B be needed? (This would be nearly impossible, since the original mortgage is so close to the value.)