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Author: RCMX One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Point Deduction on a refinance Date: 12/22/1998 9:30 AM
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I am refinancing my home, in Georgia, (primary residence) on a 30 year fixed at 7%. I am coming down from a rate of 7.375 and dropping some PMI, so why not do it, huh? I know, the rate is a little high, but it is a no-fee refinance. "No Cost to Me...Lender pays everything. The reason that I am choosing a no-cost is that I am not sure how long I will be in the house. I have been in my house for a little over a year. The note is about 150k.

Can I deduct any points that the lender pays on my refinance? This is my first time refinancing.

Any help?

Thanks
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Author: Domingo Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7462 of 121219
Subject: Re: Point Deduction on a refinance Date: 12/22/1998 9:37 AM
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<<Can I deduct any points that the lender pays on my refinance? This is my first time refinancing.>>

As far as I know, you can only deduct points on the purchase of the residence. No deduction is allowed for refinances.

Domingo



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Author: tritha Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7469 of 121219
Subject: Re: Point Deduction on a refinance Date: 12/22/1998 12:37 PM
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Can I deduct any points that the lender pays on my refinance? This is my first time refinancing.


I think you want to know if you can deduct points you paid to the lender on the refinance.
Points paid to refinance a home mortgage are not deductible in full in the year you pay them but you can deduct them ratably over the term of the loan.

Bill

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Author: vargaj Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7471 of 121219
Subject: Re: Point Deduction on a refinance Date: 12/22/1998 1:49 PM
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What that means is that if your new mortgage is a 30 year loan (360 months), then you get to deduct 1/30 of the points each year. Be careful though, because the first year you deduct less than that because you didn't have the loan for the whole year. The first year you deduct X*Points/360, where X is the number of months in the first year. Also be aware of the fact that if you sell the house or refinance the loan, you deduct all of the remaining points not yet deducted. So you get them all in the end.

Joe Varga

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7495 of 121219
Subject: Re: Point Deduction on a refinance Date: 12/22/1998 7:01 PM
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[[Can I deduct any points that the lender pays on my refinance? This is my first
time refinancing.]]

Be very careful when you hear the words "lender pays". In most cases, it doesn't mean anything more than the lender will FINANCE those expenses. You don't have to pay for them "up front", out of your pocket, but you DO have to pay for them...over the term of 30 years. And you'll also pay interest on theses "lender pay" expenses.

So make sure you know what you are REALLY doing before you jump into an empty pool.

As far as the points issue, if the lender REALLY pays them on your behalf, and you don't pay 'em either now or in the future (i.e., they are not simply financed), then you have no deduction because YOU didn't pay the points.

But if you find that the lender is simply financing the points (which I would certainly guess), then you would be able to amortize the points over the live of the loan (30 years in your example), and you would be able to deduct 1/30th of the total points over the next 30 years.

And that would remain so unless or until you paid the loan off or otherwise refinance this loan with another loan. At that time, you would then be able to take any unamortized interest and deduct it in the year that the loan is paid off completely.

For additional reading on this issue, see IRS Publication 936 on the IRS web site.

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7496 of 121219
Subject: Re: Point Deduction on a refinance Date: 12/22/1998 7:03 PM
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[[<<Can I deduct any points that the lender pays on my refinance? This is my first
time refinancing.>>

As far as I know, you can only deduct points on the purchase of the residence.
No deduction is allowed for refinances.]]

But there are deductions for interest for "points" paid or financed on a refinance, Domingo. If you would like to read more about this issue, check out IRS Publication 936 at the IRS web site. It may come in handy for the future.

TMF Taxes
Roy

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