If you are currently paying off your mortgage, then you sure look forward to the day you will be notified by the lender that your mortgage has finally been fully paid and there is no more debt on your home. It is actually, not difficult to be granted a mortgage nowadays, so long as your (and spouse’s) credit ratings are good enough and you have the capability to repay the mortgage eventually. You may not even have to pay any points because of the current lower mortgage rates.
Each mortgage point is equivalent to 1% of the mortgage value and they can be used when mortgage rates are high to lower them. As much as many consider the current rates lower enough, some individuals may still require paying points to enjoy the best possible rates. The good news is that the refi points are tax deductable and you need not to worry of an increased tax liability. Wait, don’t celebrate yet; they are not deductable in one go, which is the bad news.
Instead of deducting the whole amount of refinancing points within the year paid for, you have to pay them off over the loan’s life. What really matters here is that you will eventually deduct them after repaying the mortgage in full. There are several other home loan deductions that you can take similar to the refinanced loans. The main difference lies in the fact that the mortgage interest deductions will end up lower than they were initially. This is however, not a problem as many homeowners have no issue with taking the monthly cash flow against the tax breaks because the most important thing is the final repayment amounts taxpayers have to endure.
It is exciting to eventually get the closing statement after refinancing. It is on this document that homeowners find interest paid on the loan for the duration between the time when the first payment was due and the refinancing. This value is excluded on the taxpayer’s end-year interest statement from the lenders, but it is deductible. Those who pay their property taxes directly don’t have to make payments at the refi closing.
However, if your home loan payment includes tax money and the lender is required to make the annual imbursement on your behalf, don’t forget to take note of the distributed share of the tax on the closing statement, as it is also deductible.