High-Loan-To-Value Loans exceed the value of your
home.  Your deductions are limited with this type of
loan!

Definition
A "high-loan-to-value", or HLTV, mortgage or home equity loan is
one that equals or exceeds the value of the borrower's home. 
Another term for this loan is a "negative equity mortgage". 
HLTV loans can let you borrow  as much as 25% to 50% more than
your home is worth.  Some lenders market this type of loan toward
people who have run up considerable credit card and other
consumer debts because it can consolidate outstanding debt and
lower borrowing costs.


What is deductible?
The interest on a high-loan-to-value loan is tax deductible except
for the amount that exceeds the current value of your property.  For
example, say you own a home which you could sell for $120,000
and you are carrying a $100,000 mortgage.  A lender offers you a
125% loan for $150,000.  You have boosted your debt by $30,000.
The interest on your high-loan-to-value loan is deductible up to the
permissible ceiling amount.  In this case, $20,000 is deductible
while $30,000 is not tax-deductible. 
 

The interest payments on the $30,000 is not tax deductible.  The
IRS does not allow interest deductions on any part of a mortgage
that exceeds the market value of the house. 

Why Get One?
Why then would someone want an HLTV loan?  Generally the
annual interest rate is lower on a HLTV loan than the interest rate on
credit cards.  Also, the interest that is applicable to the equity of the
house is fully deductible.  Despite it's drawbacks, a
high-loan-to-value loan can benefit those who want to consolidate
high-interest debt and plan to stay in one place a long time.  One
thing to note is that since the loan amount that exceeds the home's
value is unsecured, a lender cannot take assets to recoup that
money.




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