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Affluent Using More Home Equity Loans; Survey Examines How Americans Utilize the Tax-Deductible Financing
[FINAL Edition]
The Washington Post (pre-1997 Fulltext) - Washington, D.C.
Author: Downey, Kirstin
Date: Dec 17, 1988
Start Page: e.01

The survey focused on homeowners who have obtained second mortgages, which are a traditional form of borrowing against the equity in a home in a lump-sum fashion, or revolving lines of credit, a newer method that permits homeowners to get money as they need it. In both cases, the loans are secured by the equity in the home.

Home-equity loans, with their tax-deductible features, are only available to homeowners. Interest deductions on consumer expenditures are being phased out for renters and homeowners alike under the 1986 Tax Reform Act. But some homeowners have transferred their consumer debt to a home-equity loan, thereby allowing them continued full interest deductions.

Contrary to some earlier suspicions, however, families do not appear to be putting themselves in financial jeopardy by borrowing against their homes. The median outstanding debt on home-equity credit lines amounted to only 10 percent of the families' net equity in their homes, according to the survey. The median outstanding balance on a second mortgage was $16,000 and the median balance on home-equity credit lines was $10,000.

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