Are architect or charter fees considered member of "construction costs" for home equity loans?
We plan to use a home equity loan to rebuild our studio, putting the loan money in a separate guard account and using that account solely for "construction costs" to ensure the interest remains tax-deductible.
Question 1: We're paying an architect to design the building and we hold to pay the city a permit payment to review and approve the design. Are these two fees considered part of the "construction costs" of a building so we can use the loan to pay these minus worrying about the IRS coming after us?
Question 2: Given this scenario, would it be wiser to use a Home Equity Line of Credit so we only borrow what we entail when we need it? My concern (as always) is variable interest rates on the lines of credit, so I'd bring back a lower interest rate today, but it might be higher next year.
Thanks!
Joe
Answers:
yes, obviously., these are legitimate costs and can be put into the taxable basis of your house. I wouldn't step for a variable loan in this cutback. Rates are on their way up, maybe path..... up. Go for a fixed rate conventional mortgage of no more than 30 years.
All items connected to construction of new whatever should be covered by construction loan. Ask your lend institution for this in black and white and put it with your paperwork should the question ever arise. Never put your trust in "they" or "they said". Get it surrounded by writing so it is defensible.
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Question 1: We're paying an architect to design the building and we hold to pay the city a permit payment to review and approve the design. Are these two fees considered part of the "construction costs" of a building so we can use the loan to pay these minus worrying about the IRS coming after us?
Question 2: Given this scenario, would it be wiser to use a Home Equity Line of Credit so we only borrow what we entail when we need it? My concern (as always) is variable interest rates on the lines of credit, so I'd bring back a lower interest rate today, but it might be higher next year.
Thanks!
Joe
Answers:
yes, obviously., these are legitimate costs and can be put into the taxable basis of your house. I wouldn't step for a variable loan in this cutback. Rates are on their way up, maybe path..... up. Go for a fixed rate conventional mortgage of no more than 30 years.
All items connected to construction of new whatever should be covered by construction loan. Ask your lend institution for this in black and white and put it with your paperwork should the question ever arise. Never put your trust in "they" or "they said". Get it surrounded by writing so it is defensible.
Related Questions: