HELOC as strategy to reduce net interest on home loan

Anyone considered a strategy like the one explained in this video? What were your reasons to not pursue it?

I can think of interest rate difference between primary mortgage and first lien HELOC, and ability to take tax deduction on HELOC interest as reasons.

You mean you can take full tax deductions on HELOC but not primary mortgage? Are you sure? That seems too big a loophole.

I know you can do it on a rental property. Take a HELOC on rental and pay down your primary. The HELOC interests counts against the rental income.

1 Like

This is not quite correct. Where you deduct interest on your taxes is determined by what the money is used for, not what it’s secured against. So yes you probably can deduct the interest on the rental HELOC if you use it to payoff your primary, but it should be done under the home mortgage interest deduction, not on schedule E since you didn’t use the money to payoff or improve the rental.


I believe you can take deductions as long as it is for “buy, build, or substantially improve”, is for the same property that is securing HELOC and the same $750,000 limit.

Is Interest on a Home Equity Line of Credit (HELOC) Tax Deductible?.