Does a HELOC have different rules than a cash-out?

Yes — HELOCs and home equity loans allow up to ~85% CLTV and often skip a full appraisal, while a cash-out refinance caps at 80% LTV and resets your first mortgage.

Is Home Equity Interest Tax Deductible?

Here is what lenders actually require for is home equity interest tax deductible? in 2026, in plain English.

The rule for 2026

Home equity interest is deductible only when the funds are used to buy, build, or substantially improve the home securing the loan, subject to the overall mortgage-debt cap. Interest on equity used for debt consolidation, tuition, or other personal spending is not deductible. Keep records of how you used the money and consult a tax advisor.

Lenders set their own overlays on top of the basics. Meet the standard below first, then confirm whether your lender layers anything extra.

Documentation you'll typically need

Recent pay stubs and two years of W-2s or returns
Two months of bank statements
Your current mortgage statement and homeowners insurance
A recent appraisal or automated valuation

Equity rules are periodically revised. Join the alerts to be told before changes affect your file.

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Frequently Asked Questions

Is Home Equity Interest Tax Deductible? — the bottom line for 2026?: Home equity interest is deductible only when the funds are used to buy, build, or substantially improve the home securing the loan, subject to the overall mortgage-debt cap. Interest on equity used for debt consolidation, tuition, or other personal spending is not deductible. Keep records of how you used the money and consult a tax advisor.
Does a HELOC have different rules than a cash-out?: Yes — HELOCs and home equity loans allow up to ~85% CLTV and often skip a full appraisal, while a cash-out refinance caps at 80% LTV and resets your first mortgage.