John is interested in tax planning and saving for his childrens education.

John is considering taking a second mortgage or home equity loan on the house in order to increase funds available for his children's tuition. He would like to understand the deductibility of the interest and any limitations that exist.

John is married and has a combined adjusted gross income of $135,000; he currently has a mortgage of $500,000.

Explain the tax consequences associated the interest deduction and how it relates to Johns situation.