NEW YORK (CNN/Money) - My husband and I are considering taking out a second mortgage to pay off several outstanding loans. We want to do this so we can deduct the interest payments on next year's taxes, although we're also considering doing a few home improvements. Do you recommend such a move?

-- Anna, Middleburg, FL

As I see it, this is one of those moves that that could be good, bad or ugly, depending on how you pull it off. First, let's take a look at the good. It's always nice to have Uncle Sam foot a portion of your loan payments, which is what happens when you deduct the interest payments from taxable income. This lowers your after-tax payment and, theoretically at least, frees up money you could use for other purposes, like paying down your debt more quickly or investing for retirement. That, as Martha likes to say, "is a good thing."

And if your house really needs those home improvements to make it more liveable, then I suppose that's a plus too, as long as you're not taking on such a large second mortgage that you're taxing your ability to comfortably make your combined first and second mortgage payments.

So what could possibly be bad about this situation? Well, I find that people who consolidate smaller loans into second mortgages do so not just because of the tax benefits, but because it's a way for them to lower their monthly payments. What many of these people don't realize, however, is that those lower payments usually aren't just the result of a lower interest rate -- which I hope you're getting -- but because the second mortgage usually has a much longer term than the loans they're paying off.

So you are likely extending the period of time you'll be in debt and may even be paying more in total interest costs over the life of the loan. That may be okay if you're really having trouble meeting your current payments or you really need to improve the old homestead. But by extending the term of your debt, you're also reducing your financial flexibility in one sense -- namely, you've earmarked income that you haven't even earned yet for repaying debt years and years into the future. That gives you less leeway for meeting unexpected financial demands.

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Which brings us to the ugly. One way this could all go terribly wrong is if you take on the second mortgage, lower your monthly payments and then begin to pile on debt again, essentially putting yourself back in the situation you're in now but with even more debt. Of course, you could then consider refinancing the whole shebang -- your first, second and any other debts -- at some point in the future. But then you're talking about keeping yourself in debt even longer.

My advice: sit down for a few minutes and realistically assess what you're trying to do here. If it's really tax benefits you're after and perhaps restoring the old homestead to tip-top shape, then borrow just enough to complete those tasks and nothing more. Whatever you do, remember, it's a lot easier to take on debt than to pay it off.

Walter Updegrave is the author of Investing for the Financially Challenged and can be seen regularly Monday mornings at 8:40 am on CNNfn.