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Hi all,
I purchased a home last October. I used a discount mortgage broker who got me a loan for "no points", all I paid him was a flat fee and the cost for the appraisal and credit report. On my 1098 statement, however, there shows the ~$1000 in interest payments for 2003, and ~$1800 in points paid. My question is, can I deduct the $1,800 as points paid to obtain my home, and if so can I do it all this year or do I have to divide it by the length of the loan (15 years)?

If I can deduct the points, it makes sense for me to itemize. Otherwise I'm better off taking the standard deduction.

I know that I should also consult a tax advisor, but I wanted to check here too to see if anybody has some thoughts.

Thanks, merchasd
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On my 1098 statement, however, there shows ... ~$1800 in points paid. My question is, can I deduct the $1,800 as points paid to obtain my home,

It sounds like they consider the flat fee to be points, so I'd go ahead and deduct them as such.

and if so can I do it all this year or do I have to divide it by the length of the loan (15 years)?

You actually have a choice, since they are to purchase your principal residence. If deducting the points in full just barely gets you over the standard deduction, then you might be better off choosing to amortize them over the life of your loan. That way you will get some benefit from deducting most of your points, just in future years. That's better than wasting most of the points now just to itemize in the current year.

--Peter <== wondering if tax programs could give that kind of advice.
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Thanks Peter...
2 more items to add for everyone:

1) The Flat fee was $500, so that doesn't match with the $1800.
2) Looking at the settlement stateement, this is exactly what was written concerning this amount:

Num FROM TO AMOUNT
--- ---- -- ------
810. "Yld Sprd Prm Pd by Lender" <Mortgage Broker> POC$1794.58L


Note that this was not under origination fee or points paid, it was apparently a yield spread premium paid by lender.

Again, this amount showed up on my 1098 in the "points" box.
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1) The Flat fee was $500, so that doesn't match with the $1800.
2) Looking at the settlement stateement, this is exactly what was written concerning this amount:
810. "Yld Sprd Prm Pd by Lender" <Mortgage Broker> POC$1794.58L

Note that this was not under origination fee or points paid, it was apparently a yield spread premium paid by lender.

Again, this amount showed up on my 1098 in the "points" box.


Whoops - now it sounds like there is a mistake (granted - its in your favor) on your 1098.

A "Yeild Spread Premium" is the lender paying the broker for the broker's services. It can be thought of, from your standpoint, as negative points. As you might already know, if you pay points, you get a lower interest rate. It works the other way as well. If you pay a higher interest rate, the lender will pay your broker money that can be used to pay for your expenses and/or the broker's compensation.

It sounds to me like the minus sign got lost in the translation and the negative points are showing up as positive on your 1098.

In this case, I would ignore the points reported on the 1098 and not report anything on your return. The flat fee that you paid is not really in the nature of points - it isn't based on a percentage of the loan.

--Peter
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