Not another HELOC question!

[maggie88ca]

Hi all,

I need some advice to try and wrap my head around the logistics of my fiancial situation. I currently have a HELOC for my mortgage and a small investment loan. It allows me to track the interest on the loan for income tax purposes. I want to switch back to a conventional morgage but not sure what to do about the investment loan. I'll use examples to try and explain this better. Current mortgage amount $500,000(all amounts are made up), current investment amount $50,000. New mortgage amount will be $700,000 and loan will be paid off. How do I continue to track the interest on the loan even though it will be paid off and I don't actually need the loan money. Can I get an new loan for $50,000 and just use it to pay down my mortgage?

Thanks in advance.

[DrXenon]

Seriously, do you not know how to compute compound interest?

[maggie88ca]

DrXenon thanks for your very helpful comment but this has nothing to do with compound interest. I'm asking how you financially go about tracking the loan interest and getting statements to prove you paid that interest for tax purposes. Should I apply for another HELOC for the $50,000 amount only? If so what do I actually do with the funds since that amount is already invested? Can I use those funds to pay down my mortgage or will that get me in trouble with the tax man etc?

Any other real advice would be greatly appreciated.

[sslinn]

What I did is use percentages.
I refinanced my condo to get $$$ to buy a house. When the condo became a rental property I do not claim the interest on the money that I used for a downpayment on the house.

Hope that makes sense.

[Ryan5459]

Maybe I dont understand your question but cant you just claim the interest that was charged on your HELOC? It doesnt matter if you decided to close the HELOC during the year - there was still a time when you were charged interest to make the investment.

If you pay off the investment loan buy refinancing you home I dont think you can claim part of the interest on your new higher mortgage as an investment loan. It sounds like you are trying to almost reverse the Smith Manueouver.

[Anonymouse]

Seriously, do you not know how to compute compound interest?

+1

You paid x% on $y for z months on your original loan, which you then refinanced at a% on y$ for b months. If you can't calculate the interest you paid in total, you shouldn't be investing using borrowed money, because you failed Grade 9 math.