Buying your first home is a huge milestone in life and brings with it many benefits like accomplished dreams, a better neighborhood and greater convenience. However, one benefit that many home-owners overlook is a potential savings account.
This savings is created in the form of home equity. Equity is the total value of your home that you own. This is based on the level of down-payment made each month. When the market price of your home increases, so does the equity and ultimately the value. This equity can be used in many different ways. Here are a few tips and misconceptions about home equity.
Read Up On Tax Laws
The Tax Cuts and Jobs Act introduced in 2017 brought numerous regulatory changes on taxes including those associated with home equity loans. The first change is on the interest of the tax-deductible on the equity. The new rule says that the line of credit on the loan is only eligible for a tax deduction if the loan is used for the improvement of the home.
The second change concerns the interest deduction. As of 2017, interest deductions are only available for homes that have a mortgage of $750,000 or less. However, statistics show that the average home mortgage in the U.S is $260,000 so this law will not affect a majority of Americans.