Conventional Loan vs Home Equity Loan - The Bills.com Blog

Bills.com Blog > Mortgage Questions > Home Equity Loan or Conventional Loan

Conventional Loan vs Home Equity Loan

Sunday, Jul 15, 2007

Question: How can you calculate the tax benefits of a home equity loan vs a conventional loan with a much lower interest rate where with the conventional loan you cannot deduct the interest charged?

Answer: Thank you for visiting Bills.com. Here is an answer to your question - which I think I can help you with.

One very nice incentive for home ownership is that mortgage interest is tax deductible. This means the amount that you pay in interest x your marginal tax rate (I generally assume around 40%, but it depends on your tax bracket) is the amount you will save on your taxes.

The tax deductibility is not unlimited, however, so you should check with your CPA or tax advisor.

If the interest paid on a HELOC is more than on a conventional
loan, then you are correct that your tax deductibility will be higher... but so will the cost in interest fees. Typically, you will want the loan with the lowest rate, points and fees. For most homeowners, this is achieved by getting a full first mortgage.

Bills.com makes it easy to compare mortgage offers and different loan types. Please visit
the loan page and find a loan that meets your needs at
https://www.bills.com/mortage/refinance .

I hope that his helps you make the right decision for your particular situation, but be sure to shop around and find a loan that meets your needs.

If you would like more information, please visit our mortgage resource page .

Also, make sure to get a free financial health check-up with Bills IQ!

Submit questions/comments about this post:
Name (required)
Email (required never displayed)
Comments

Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

Information provided by Bills.com is for general informational purposes only and is not be construed as legal, financial, bankruptcy, tax or other professional advice. Should you require more detailed information or specific professional advice tailored to your situation you should consult an attorney, financial planner or tax advisor.

While we believe all information provided by Bills.com to be accurate as of the date of its posting, we cannot ensure its accuracy. Use of this site and any information contained on or provided through this site is provided without any representations, warranties or guarantees. Bills.com is not responsible or liable for any decisions or actions anyone may take based on the information provided. Please see Terms of Use.
Subscribe to Bills.com RSS Feed
Bills.com Site Map > Mortgage Index Pages > Mortgage Blog Entries