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Home Equity for a boat?

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Old 05-01-2004, 08:34 AM
  #21
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Quote:
Originally posted by Baja Daze
Just so there's no confusion, here's the text on Interest deductions on boats, straight from IRS publication 936:

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

http://www.irs.gov/publications/p936/ar02.html#d0e495
As long as the boat has a head (porta potty), an electrical outlet, and a place to sleep it qualifies as a second home which excludes it from having to be secured by another home.

I have been thinking about the home equity loans in certain instances. I have a lot of equity in my house and I want a Gladiator. With a Gladiator I can not deduct the interest as a home mortgage so the other way around that is to use a home equity loan. It will be at least another year, maybe 2 before I buy so I will be weighing the options very hard from now until then. I HAVE to at least be able to deduct the interest to personally justify spending that much money to myself

The key for me is having enough equity in the boat that if things do get bad; I can dump the boat and limit the losses, which with these boats means a LOT of equity

Last edited by clearcut3; 05-01-2004 at 08:44 AM.
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Old 05-01-2004, 09:29 AM
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real easy.. not take an apprenticing asset and dump a deprecating asset

think the house will go up in vaule and the boat will go down
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Old 05-01-2004, 10:11 AM
  #23
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real easy.. not take an apprenticing asset and dump a deprecating asset

think the house will go up in vaule and the boat will go down
Exactly. I hope I'm not the only one who remembers the big devaluation in Calif. real estate (1989 ~ 92?). Foreclosure City. There was a buying frenzy, people were paying top dollar. All of a sudden, the bottom drops out and your mortgage was more than your house was worth...and it's going to happen again.

I would only use a home equity loan for two reasons: Purchase another home (investment property), or improve the home you're in.

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Old 05-01-2004, 10:53 AM
  #24
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Even when I was a teenager, my auto loan was through my parents home equity line. Never from a finance company (My dad was general mgr of a car dealership). At that time, (early 1980's) auto loans were running 12%, and the home equity interest rate was only 9%.

I just made the payments to my parents, and they got the extra benefit of writing off the interest on their income taxes.

The minimum amount due was always far lower than the standard 36 month 12% interest car payment, but with the equity line, I could pay back as much as I wanted, any time I wanted. During months that were tight, I just paid the minimum.

To me, it was the greatest deal ever!

So today, I have both autos plus our boat financed on our home equity line. Our interest rate is only 4% and we get to write-off the interest on our taxes every year.

Maintain enough in savings to make the house payment and home equity payments for six months or longer, in case your financial status turns south in a hurry. (You should plan for this anyway). That should give you some time to sell the boat and pay off the equity line if necessary.



But here are some warnings:

The yearly limit on the deduction for home equity loan interest is the interest on loans totaling $100,000 ($50,000 if married filing separately). If you used all or part of the loan for your business, it might be better to elect to treat the debt as unsecured by your residence. In that way, you can write off the interest as a business expense. But once you make the election, you can't reverse it without Internal Revenue Service approval.

You cannot deduct interest on any amount of the home equity loan that is more than the difference between the market value of the home and your mortgage debt.

These rules apply to home equity loans taken out after October 13, 1987. Consult with an experienced tax preparer if your home equity loan preceded that date, you have questions or your situation is out of the ordinary.

A home equity loan may provide a tax benefit, yet may not be worth the risk of losing your home should you need to default on the loan. Remember that a home equity loan is secured by your home.

Last edited by BK; 05-01-2004 at 02:37 PM.
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Old 05-01-2004, 02:43 PM
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Quote:
Originally posted by Danny_Ocean
Exactly. I hope I'm not the only one who remembers the big devaluation in Calif. real estate (1989 ~ 92?). Foreclosure City. There was a buying frenzy, people were paying top dollar. All of a sudden, the bottom drops out and your mortgage was more than your house was worth...and it's going to happen again.

I would only use a home equity loan for two reasons: Purchase another home (investment property), or improve the home you're in.

D. Ocean
Pompano Beach, FLA
i'm not to sure that we aren't close to that again.. some banks not want to touch the laons for houses right in souther fl.. i think we are in for a correction i the housing market real soon
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Old 05-01-2004, 04:13 PM
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Here's a thought. Buy a boat when you've saved enough money to pay for it in CASH. No interest, no payments no hassles.
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Old 05-01-2004, 05:52 PM
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Take a 5 or 7 yr loan and pay it off early.
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Old 05-01-2004, 09:40 PM
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Here's a thought. Buy a boat when you've saved enough money to pay for it in CASH. No interest, no payments no hassles.
At 5.5%, money is almost free. Use it and save your cash for a rainy day or other investments. (And who here, with the exception of a few, makes enough scanool to walk in to a dealership with a briefcase containing $100k+?).


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Last edited by Danny_Ocean; 05-01-2004 at 09:44 PM.
 
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Old 05-02-2004, 01:44 AM
  #29
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Quote:
Originally posted by Danny_Ocean
At 5.5%, money is almost free. Use it and save your cash for a rainy day or other investments. (And who here, with the exception of a few, makes enough scanool to walk in to a dealership with a briefcase containing $100k+?).
D. Ocean
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EXACTLY

Some people don't understand this concept. I could pay EVERYTHING off today...but financially that wouldn't be beneficial.
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