Lower interest rate
Because your property secures your home equity loan, this
type of loan presents less of a risk to lenders who can
provide lower interest rates to you.
Tax deductible mortgage interest
While your tax advisor can outline specific tax benefits
available to you, we can say that most people reap tax
benefits from a home equity loan. No matter whether you
use the loan for consolidating bills, purchasing a car
or taking a vacation, any interest paid on the first $100,000
borrowed is tax deductible. If you pay $5,000 interest
on your home equity loan, you end of year taxable income
will be reduced by $5,000.
If you're using a home equity loan to purchase another
home or make improvements to an existing home, it gets
even better: you can deduct interest paid not on the first
$100,000, but the first $1 million borrowed. Why? In the
eyes of the IRS, home improvement loans are more similar
to first mortgages.
