Consolidating mortgage and line of credit

As of 2018 homeowners can deduct interest paid on first mortgages, up to a limit of the interest payments on the first 0,000 of debt.

If the interest deduction is important to your finances then a cash out refi on your original mortgage may still qualify.

“Debt consolidation and home renovation are the two biggest reasons that consumers would take out a home equity line of credit,” Mike Kinane, senior vice president of consumer lending at New Jersey-based TD Bank, told Lending Tree.

But credit counselors caution that a home equity line of credit, or HELOC, may not be your best option, because it expands your total credit and may tempt you to keep overspending.

In the past interest on home equity debt was tax deductible, but it no longer is unless it is obtained to build or substantially improve the homeowner's dwelling.

The Tax Cuts and Jobs Act of 2017 changed what home debt interest payments could be deductible against income.

Interest on a HELOC used to pay personal living expenses, including credit card debts, is not deductible. A HELOC could increase your housing costs if you’re still paying off a first mortgage plus the home equity line each month, warned Cara Pierce, a certified housing counselor for Clearpoint, a division of Money Management International, a nationwide credit, and housing counseling agency.

If you use up your home equity cushion to consolidate debt, “You increase the risk that you won’t be able to keep up with your mortgage payments if your life is turned upside down by the three D’s: death, divorce or disability,” said Pierce.

For example, if you use a 5% annual interest rate HELOC to pay off a 3% 48-month car loan from a credit union — the going rate in March, according to NCUA — you’d increase your costs.

For your convenience a tab above lists current local interest rates.

You can use these rates to estimate the price of various mortgage loan products.

This calculator is designed to help determine whether using equity in your home to consolidate debt is right for you.

Enter your credit cards, installment loans and any other debt you wish to consolidate by clicking on the 'Enter Data' button for each category.

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