The End of the Home Equity Loan Interest Deduction – What Does It Mean For You?

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As the saying goes, all good things must come to an end. Homeowners have been able to deduct interest paid on home equity loans and lines of credit for decades. Thanks to the new tax law, that deduction is now gone.

But does that mean home equity loans aren’t worth it? Not necessarily. Here’s why:

Rates are still low.

A home equity loan gives you the opportunity to borrow at a very low rate. Since the average home equity loan is over $30,0001, a low rate will keep your payment low, too. Compare a $30,000 home equity loan payment at 5% for 5 years to a $30,000 personal loan payment at 10% for the same term. The home equity loan payment is only $566 vs. a personal loan payment of $6372. Home equity loans remain one of the most affordable ways to borrow.

We Florida Financial earned a Datatrac Great Rate Award for home equity loans by beating the Florida average rate. As of January 23, 2018, members can save up to $1,703 by choosing a We Florida Financial home equity loan over other Florida lenders. Details

A home equity line of credit lets you access the funds as you need them.

Since interest is charged on the outstanding balance, you can keep your interest charges to a minimum by borrowing only when necessary. If you’re borrowing for several projects, this is a good option.

Fees associated with home equity loans are minimal when compared to a mortgage loan.  

We Florida Financial is waiving all home equity loan closing costs through March 31, 2018. The length of time from application to closing on a home equity loan can be as little as two weeks. When you combine the advantages above with a fast closing, a home equity loan is still a good choice.

If you just don’t want to give up a tax deduction, then consider a cash-out refinance. This type of loan refinances your current first mortgage at today’s rates and gives you additional cash in a lump sum at closing. Since the entire amount is considered a first mortgage, all of the interest may be tax deductible.

As you consider your borrowing options and financial situation, consult your tax advisor and make the choice that is right for you and your family.

1According to Raddon Performance Analytics, September 2017 data, for newly opened home equity products, the average size of a new HELOC was $31,730 and the average home equity loan was $49,141.

2Payment examples are approximate. Contact us for payment examples for your situation.