Home equity — it’s on the rise

Many U.S. home owners have seen their home equity rise over the last several years. Home equity is basically the difference between your home’s appraised value and the total amount you owe on your mortgage.

There are two basic ways to tap your home equity— through a home equity loan (also called a second mortgage) or a home equity line of credit. A loan can provide money in one lump sum, as opposed to a line of credit that can provide access to money you don’t have to use all at once. With the line of credit, you’ll pay interest only on the money you use, not the entire available line.

One of the most popular uses for home equity is to fund home improvements, although the proceeds from a home equity loan or line of credit typically can be used for a wide variety of things.

Is the interest on a home equity loan or line of credit still tax deductible? Major changes are in the works for the nation’s tax code. But the Internal Revenue Service said that taxpayers in many cases still can continue to deduct the interest they pay on home equity loans. You’ll want to consult an accountant or tax advisor to check how the new rules apply to your specific situation.

Questions about home equity loans? We’re here to help you!