Mortgage Refinance Can Save Taxes

The mortgage market has been in turmoil for the last year, sometimes at a loss or benefit to the homeowner. But if a homeowner has refinanced, or is thinking of refinancing, there may be a tax break in their future.

Homeowners are seeing that now may be the right time to refinance their mortgage. Many homeowners are looking to refinance out of an adjustable rate mortgage, or are looking to take advantage of low rates and highly competitive lenders. One more bonus to refinancing a home loan is a tax deduction. Many homeowners are not aware that, if they paid points at their mortgage closing to get a lower rate, they can claim these points as a tax deduction.

When purchasing a house, a homeowner can take 100% of points (or a percentage of the loan amount) paid at closing as a deduction. If a homeowner refinances, the points must be distributed to the life of the loan. Many homeowners are refinancing multiple times in one year; if this is the case, points paid at the first closing can be 100% claimed, since the loan did not last for more than 12 months. When looking to save money on a mortgage, any money back helps.\r\n

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