Points on Refi

[S T]

I have a t/p that refinanced in June 2007 to the same lender - so did not release the unclaimed balance of amortized points as an interest deduction.

Then t/p refinanced in March 09 and ended up with the same lender (merger of banks) so once again I did not release the unclaimed balance of amortized points.

Now in October 2010, t/p refinanced again, but there is a new lender - can I now release the unclaimed balance of amortized points from June 07 and March 09, and start all over again with the new Lender?

Sandy

[Gene V]

I have a t/p that refinanced in June 2007 to the same lender - so did not release the unclaimed balance of amortized points as an interest deduction.

Then t/p refinanced in March 09 and ended up with the same lender (merger of banks) so once again I did not release the unclaimed balance of amortized points.

Now in October 2010, t/p refinanced again, but there is a new lender - can I now release the unclaimed balance of amortized points from June 07 and March 09, and start all over again with the new Lender?

Sandy

That's what I would do.TTB 4-12

Mortgage paid off early. If points are being deducted over the
life of the mortgage, and the mortgage is paid off early (such as
another refinance or sale of house), then any remaining balance
is deductible in full in the year the mortgage ends. However, if a
mortgage is refinanced with the same lender, then any remaining
balance is deducted over the life of the new mortgage.

[S T]

Just needed confirmation

Thanks Gene,

That is what I thought, but just seemed odd, as 2 refi's of unclaimed amortized points to release.

Sandy

[veritas]

who'd a thunk

Ppl would refinance more often than taking in their dry cleaning?

[FEDUKE404]

You cannot accumulate them

Ppl would refinance more often than taking in their dry cleaning?

Probably those who made a 0.1% down payment in the first place......

BTW: The rules are pretty clear that "unused" re-fi points must be taken in the year the underlying mortgage ceased to exist. To do otherwise would be comparable to the folks who like to "save" their contributions until they get enough to make it worthwhile.

FE

[mactoolsix]

Probably those who made a 0.1% down payment in the first place......

BTW: The rules are pretty clear that "unused" re-fi points must be taken in the year the underlying mortgage ceased to exist. To do otherwise would be comparable to the folks who like to "save" their contributions until they get enough to make it worthwhile.

FE

Feduke - could we get your take on this earlier thread in relation to unused points. Do you know of a reference we could cite about this?

http://www.thetaxbook.com/forums/showthread.php?t=15929&highlight=points

thanks!
Mike

[FEDUKE404]

Terminology by IRS is a bit unclear

Feduke - could we get your take on this earlier thread in relation to unused points. Do you know of a reference we could cite about this?

http://www.thetaxbook.com/forums/showthread.php?t=15929&highlight=points

thanks! Mike

Sorry for the delay - I've been busy! Here is the best I could create tonight.

I've always been of the opinion that for a closed-out loan the remaining unused/unamortized points were to be taken in the year of that event. That is what I have always done, so I have never run into the "oops!" issue for having them stack up due to a (possible) oversight.

Further research work may be necessary when I am able to take a deep breath.

In the meantime, I did (quickly) find the following. Pay particular attention to the same lender reference: "Even if you refinance again into another loan, you will not lose out on the benefits of deducting your mortgage points. You may have had to deduct your points monthly during the time you held your first refinance loan. When you pay off that loan with a new refinance loan, the government stipulates that you can deduct the total remaining point balance that year. Consider this example. You took out a 30-year fixed loan and paid $2000 points. Each year you have deducted $67 dollars on your taxes. After five years you have deducted a total of $335, but you decide to move into a loan with a better interest rate. When you pay off your first refinance loan with the second, you can deduct the remaining $1665 in mortgage points that same year.

Be aware though, that one exception to this rule is if you obtain your next refinance loan from the same lender that financed your earlier loan. In this situation, the IRS will require that the remaining point balance be added to your new loan points and that amount will be amortized over the length of the new refinance."

Look carefully at the bottom left column on page 7 of http://www.irs.gov/pub/irs-pdf/p936.pdf which seems to support the above. "Can" is an interesting word for a tax professional, but the more restrictive rules for a refi with the same lender seem reasonably clear. IMHO, the IRS needs to tweak their wording a bit. Either use "should" or "must" and if not then provide further explanation. (Reminds me of the recent fiasco with Medicare B premiums for the self-employment health insurance deduction. )

This should help you a bit......perhaps other board members with more time and available resources can chime in.

FE

[mactoolsix]

The debate goes on . . .

FE
Really appreciate you taking the time to chime in on this. We were aware of the "same lender" clause, but the issue has been a simmering debate in the office. Guess the debate will continue.

Mike