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President Donald Trump’s new tax reform bill brought many changes to the tax code, including cutting away the deduction for the interest paid on home equity loans (known as HELOCs).

However, this reform’s timing seems a bit awkward since the “tappable” equity (the Fed defined as available equity in U.S homes) available to U.S. homeowners reached an all-time high in 2017.

As nearly 80 percent of U.S. homeowners sit on substantial amounts of equity, many analysts are now questioning the purpose of eliminating HELOC interest a mortgage deduction on primary residences.

What are home equity loans?

Home equity is the difference between a home’s market value minus the amount of money needed to pay-off the existing mortgage. This equity can be used to borrow cash through home equity loans – which are generally revolving lines of credit.

The maximum quantity of money that a borrower can access is typically equal to 80 percent of value of their home.

The growing market of home equity borrowers:

The amount of tappable equity is now as high as it has ever been. Over 42 million homeowners with mortgages across the country are now sitting on nearly $5.5 trillion in untapped equity!

To make a direct comparison, in 2012, shortly after the financial crisis, this value amounted to just $2.5 trillion.

Today, less than 2.5% of homeowners are “underwater.”

What is changed under the new Trump Tax Law:

Before the tax change, borrowers could deduct interest paid on up to HELOCs with balances up to $100,000 from their taxes. However, under the new tax reform bill, the interest paid on home equity lines of credit are no longer deductible. The change takes effect in 2018, so this is the last year that homeowners can deduct the interest they pay.

Primary loans are left untouched, meaning that mortgage borrowers can still write off the interest paid on their mortgage debt up to $750,000 (although this is down from $1 million).

What does this mean for homeowners? 

If you are seeking to “cash-out” on some of your equity – please be aware of the current tax changes!  Many Florida homeowners are considering selling to “cash out” of their home or considering a full refinance if they have existing HELOCs.

If you have any questions related to the Trump tax laws, HELOCS, refinancing or selling your home, please call the lawyers of Boss Law for a FREE CONSULTATION.

The Institute of International Finance (IIF) reports that, in the third quarter of 2017, the global debt grew to a record high of $233 trillion.

The main protagonist of this “debt apocalypse” is, once again, credit card debt – effecting roughly 31 million Americans (about 35% of adults).

U.S credit card debt reached $1 trillion in 2017 – a new all-time high!

This equates to roughly $15,000 per U.S. household. To put this in comparison, U.S. credit card debt was $800 billion in 2008 — before the crash.

What does this mean?

Per a new report published by CreditCards.com, more than 68% of U.S. adults struggle with debt, 30% feel like they will never be free of debt for the rest of their lives, and 38% of them have no idea how or when they could clean their slates in the foreseeable future. The most optimistic Americans (the remaining 32%) say that they would need no less than nine years to clear up their credit lines. The percentage of adults struggling the most: the Silent Generation (72+) and Baby Boomers (53-71), with an 83% and 70% rate, respectively.

If I have debt, what can I do?

While this may sound dire, debt resolution can often be much less painful than people fear. Many homeowners with credit card debt may be able to refinance their home – the U.S. real estate market has nearly $5.5 trillion in equity – with interest rates still near historic lows.

Debt settlement, credit consolidation and bankruptcy are also possibilities — and are often much more successful than people think.

If you have questions regarding any kind of debt – whether credit cards, student loans or otherwise, please give us a call for a FREE CONSULTATION.

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