HELOCS and pay of your rentals

  1. what is it HELOCS?
  2. Do you pay off your rentals or do you pul out equity and refinance it? I have heard that it is not good to have a paid of property because of the taxes


The best definition of the HELOC is a home equity line of credit is a form of revolving credit in which your home serves as collateral. Seeing that a HELOC is likely a consumer’s largest asset the recommended use of ones credit lines would be for major items such as education, home improvements, or medical bills and such.

Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the home’s appraised value and subtracting from that the balance owed on the existing mortgage.

It has been said that if your HELOC was used to purchase the home (1st and 2nd combo for example), then it is part of your acquisition indebtedness. It would seem that you could go $100K above your current mortgage balances that is to say you may be allowed to deduct the interest because the debt is secured by your home.

However there may be some lose ends in that logic. I suggest you read part 2 of IRS Pub 936, Home Mortgage Interest Dedcution