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Path: utzoo!decvax!ittatc!bunker!rha
From: rha@bunker.UUCP (Robert H. Averack)
Newsgroups: net.invest,net.taxes
Subject: Re: Money from refinancing
Message-ID: <1201@bunker.UUCP>
Date: Fri, 26-Sep-86 09:28:58 EDT
Article-I.D.: bunker.1201
Posted: Fri Sep 26 09:28:58 1986
Date-Received: Sat, 27-Sep-86 05:14:47 EDT
References: <8@oliveb.UUCP>
Reply-To: rha@bunker.UUCP (Robert H. Averack)
Distribution: na
Organization: Bunker Ramo, Trumbull Ct
Lines: 56
Summary: 

In article <8@oliveb.UUCP> gnome@oliveb.UUCP (Gary) writes:
>What are the ramifications of "taking money out" when
>refinancing your house?
>
>It looks like a good way to finance major home improvements
>but I am somewhat leary about the long-term effects.
>
>HELP!?
>
>Gary

Well, Gary, taking money out, in essence, is borrowing a sum of money
which is more than the outstanding principal+interest on your current
mortgage.  The difference between the two, minus new closing costs, is
your final sum.

As far as how much, that is determined by the current market value of
your home, as determined by an independent appraiser.  The bank will
take that value and simply apply an "80-percent loan-to-value" maximum,
not to exceed your income's ability to make the new monthly payments.
In other words, if your house is now worth $100,000, you can borrow up
to $80,000, so long as you can make the monthly payments on that loan.

Now for the kicker...be very cautious about the real estate trend in
your area, because you are putting yourself in a newly "leveraged"
position.  If the outlook is for good future appreciation, you're in
good shape to borrow the money.  However, if your area is experiencing
near-zero or negative appreciation (e.g. Texas), beware of putting
yourself in too much jeopardy.

Final word:  the new tax law calls for the elimination of interest
deductions for "consumer credit", i.e. credit cards, car loans, etc.
However, since this borrowed cash is a mortgage, you can continue to
deduct your interest payments.  Nice beney, huh?

Last, but not least (I know, I said final word above...I guess I'm
verbose :-), your discount points on a refinance is NOT fully
deductible as interest in the first year, like a new mortgage.  You
must depreciate it over the life of your loan.

I know, LONNNGGGG winded, but you did ask for help!  :-)  :-)  Good Luck!

     Bob Averack


-- 
 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !
 !             (Robert H. Averack @ Bunker Ramo, Trumbull, Ct.)          !
 !                                                                       !
 !     ##   "...it is better to have loved      USENET: bunker!rha       !
 !    #OO#    in lofts than to never have       UUCP: bunker!/usr/spool  !
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 !   ##\/##    - Julius "Groucho" Marx          OFFLINE: 35 Nutmeg Dr.   !
 !   ######      ("Monkey Business" - 1930)         Trumbull, CT  06611  !
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