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New Tax Law Could Change Your HELOC Deduction
‘Tappable equity’ at record high, but tax law could change impact
JACKSONVILLE, Fla. – Jan. 8, 2018 – Jacksonville-based Black Knight's monthly Mortgage Monitor found that homeowners' "tappable" equity reached a record high in the third quarter.
As of Sept. 30, 42 million homeowners with a mortgage had nearly $5.4 trillion in equity available to borrow against, assuming a maximum 80 percent total loan-to-value ratio, according to the report. More than 80 percent of all mortgage holders now have available equity to tap via a first-lien cash-out refinance or home equity line of credit (HELOC).
Under the recently passed tax reform plan, however, interest on HELOCs is no longer deductible, according to the report, increasing the post-tax expense of such products for those who itemize.
Black Knight's Ben Graboske says the math would still favor HELOCs for many borrowers with high unpaid principal balances who take out low-dollar lines of credit. However, for low-to-moderate "unpaid principal balance" borrowers taking out larger amounts of equity – assuming interest on cash-out refinances remains deductible – the post-tax math may now favor a cash-out refi.
Florida is among states with the highest percentage of non-current loans and seriously delinquent loans, Black Knight reported.
Source: MBA NewsLink (01/08/18) Sorohan, Mike