Home Equity Loan

First home time home buyer purchasing an "investment" home wondering about tax and gain treatments?

I purchased a unit in a high rise building in Baltimore 2 years ago. The construction is finally finishing up and I am set to close July 07. The idea was always for this to be a primary residence however I have since moved to California. I locked in a price of $350k and it has appreciated to at least $425k so I still want to close. Through USAA they are offering me a "Primary Mortage, Second Residence" loan which gives me a primary rate though acknowledging I will nto live there year round. What are the best ways to treat the taxes and more importantly the gains? Will they be capital gains? Can I avoid that? I have also considered taking a small equity loan. How will this affect the overall situation?

Public Comments

1. You loose all of your income tax deductions, if that is what you are talking about. They may give you the rate, but that does not change tax law. You don't pay your capital gains until you sell. This mortage again doesnot protect you from paying your fair share. The only way to avoid CG for you would be to do an exchange instead of a sale.
2. I would think that you would be able to gain the same or more interest in a second mortgage.. I mean think about all those flippers out there.. They get the interest and then some.. I was told when we bought our home there was a seven year penalty. Meaning if we were to sell the home before that time was up than we would loose all or some of the gain.. I bought a 4/2/2 for only $40,000 and have had it for a little over a year... It now is up to $56 with hardly any work add to the home.. I think you might want to go talk to you're broker and see what they say..