Mortgage Settlement Statement

[pmedders]

Client refi'd residential rental and on settlement statement, it shows loan origination fees of $2020. But it also shows "loan discount points" of $10,100. Does anyone know why there would be two different charges for points??

[BOB W]

Yep

They got rippppppped off.

Not to seem so calous, discounts are usually associated to buying down the mortgage rates................... but I still think they got ripppppppppppppppped off.

[Brian EA]

Client refi'd residential rental and on settlement statement, it shows loan origination fees of $2020. But it also shows "loan discount points" of $10,100. Does anyone know why there would be two different charges for points??

The$2020 is what the broker made. The $10,100 was used to buy down the rate. I dont think they got ripped off. Maybe their credit was not great so they had to buy down. That explains the 2 different charges

[pmedders]

Points

So both charges are eligible to be amortized over life of loan, correct??

[jainen]

Both

Both loan origination and discount refer to points, if they are calculated as a percentage of the loan amount and if the rate is normal for that kind of loan. Whether it can be amortized depends on how the loan proceeds were used. On a rental, you can ONLY deduct interest on acquistion debt or debt used directly for the rental activity.

[JG EA]

Speaking of which

I have a client that keeps every year refinancing his rentals and using the money to finance other rental endeavors or investment purchases. It is a nightmare to trace. When I keep telling him he is not getting a deduction on all this (depending on where it goes) he just looks at me with a blank face and does the same thing next year.

Well, this year, he gave me two mortgage interest statements for one of his rentals. One that was never there before. When I inquired about it the loan was for another $100,000. I'm still waiting on where the money went.

This is a tough time of tax season.