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Tips to Homeowners

February 23, 1986|ARMAND L. FONTAINE

Question: I am going to buy a second home in the mountains, but the proposed tax reform bill concerns me. The interest payments would not be deductible, nor would the other taxes. Do you feel that this legislation might be passed within the year?

Answer: In all probability, some type of tax legislation will be passed in 1986. With the lobbying ability of the lending institutions, the real estate and home builders association, the housing tax legislation will probably end up considerably watered down. This should be true whether it be the first, second or weekend house.

I am certain that the tax advantages of home ownership of primary houses will always be available. In the future, if the tax benefits for second homes are not available, creative financing should come about so that the loans for both houses will be against the principal residence. Real estate people, builders, and bankers can be very creative.

Q: I am told that housing in California is probably the most expensive in the nation. What is the cost of housing like in other countries?

A: A friend told me that a typical 700-square-foot house 30 miles from Tokyo costs more than $100,000. However, the interest rates are between 5% and 7%.

I understand that housing costs are higher in Hawaii than in California, and less expensive in Alaska.

Q: We are contemplating borrowing money for a home-improvement project, can you make any suggestions?

A: If you have stocks or bonds, you might consider borrowing against them. Usually the cost of money is just slightly over the prime rate, and you usually only have to pay the interest payments.

If you have an existing loan and it is at a higher interest rate than the prevailing 12.5%, you should consider refinancing the home at a lower rate.

The most costly ways of financing are second mortgage or home equity loans, because the interest rates are usually about the same as on auto and credit card loans.

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