I live in a condominium and have just been hit with a special assessment of approximately $40,000. I'm going to have to tap my home equity since I don't have this amount on hand, and would like to know if there are any pros/cons to a home equity loan versus a cash-out refinance that would make one preferable to the other. I have a fixed-interest, 30-year mortgage and the interest rate is about 1% higher than the current rates. My plan is to sell in 2-4 years. I'm not interested in a HELOC.

1 Answer 1


You have to do the math, taking into account the cost of getting the loan and the time it will take to get access to the funds.

I would start with your current lender and/or your current bank.

If you need the money very quickly then time may be the most important thing. If you have months to get the funds, then the short term and long term costs would be the most important.

In a parallel track you may want the Condo board to get an opinion regarding the tax issues. A long time ago we faced a special assessment of a few thousand dollars. The legal/tax expert the board consulted with determined that the special assessment could be written off immediately by people who were renting out their units. They didn't have to depreciate it over many years.

In the United States there is a test to determine if you can deduct the interest on the equity you are accessing, this is for individual tax payers:

This is from IRS Publication 936 (2020), Home Mortgage Interest Deduction

To be fully deducible:

Mortgages you (or your spouse if married filing a joint return) took out after December 15, 2017, to buy, build, or substantially improve your home (called home acquisition debt), but only if throughout 2020 these mortgages plus any grandfathered debt totaled $750,000 or less ($375,000 or less if married filing separately).

The question for you is does the special assessment "substantially improve your home "

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