Home equity loan as first mortgage - Tax implications

One of the local banks is offering a great promotional rate
on a 20 year fixed rate home equity loan. The rate/cost is
lower than I can get from any of the banks or mortgage
companies on a no point/no closing cost "mortgage
refinance". I was planning to use this to refinance and pay
off my current first mortgage of 130K and am not taking out
any additional cash. They claim that aside from not
escrowing my taxes, that there essentially is no difference
between a home equity loan and a mortgage. Is this true? Are
there any tax or other implications that anyone knows of
that I should know about. Would the home equity loan be
treated the same as my current mortgage by the IRS? There
are no points and or closing costs, I have owned the home
for 1 year and this is my principal residence if those items
matter. Would apreciate input as this is an area I know
little about.

This seems too good to be true. The major difference
between a home equity loan and a 1st mortgage is that the
home equity lender is 2nd in line and therefore takes more
risk. More risk and a lower rate are inconsistent. Are you
sure you could not get a refinance deal better than this?

Since you are just trading your mortgage balance for another
refinanced mortgage, and there are no points, the interest
paid on the refinanced arrangement would be deductible just
like the original mortgage.


If you had taken out more of a loan and your mortgage loans
then exceeded the equity in your home, the amount above
equity is a personal loan on which you have no deduction.
And if you paid points to get this refinancing loan, you
would be able to deduct the points only over the life of the
loan.

Mortgage interest lock problem

Last Wednesday morning I instructed my Mortgage Loan Broker to go ahead and get a rate-lock on a 30 year fixed loan at 6.75% with 1 point. She faxed the lock request to a nationally known lender- let's call them Fed Up. I was happy because I knew interest rates were going nuts, so I felt it was a good deal. At 3:45 pm she received a rejection fax, because of a technical problem. She needed me to sign a letter clarifying the situation. I raced down, and signed the letter at 4:06 pm, but the broker advised me that the bank did not accept loan locks after 4 pm.


The next day, I called her and I was told the best deal was now at a bank we'll call Mellon Head Bank. It was 6.75%, but 1.875 points. I said go for it, although I was not happy.


Today my broker gleefully informed me we got the rate, but it was 2.125 points, not 1.875 as I had been told. She said that the rate request is only valid if the bank doesn't raise the rates before our request is faxed in. When in the hell did the bank raise the rate, I ask? She tells me "Before our request went in". How does she know? The bank confirmed it today. What if it was their rate from this morning, or Friday morning? How would we know?


Here is my question. Why do they call it a rate lock if there is no such thing? Who can I complain to? How can I force them to honor the rate they quoted me?


I feel like I've been raped, and the only bait and switch jobs I have heard of came at the end of the process- like "Gee, we're sorry, you didn't qualify for that rate" 2 days before closing.

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