Shawn S

I refinanced my house earlier this year when the rates bottomed out.
I got a great rate, but had some pretty hefty closing costs because I went through a mortgage broker.
Title search, title insurance, appraisal fee, broker fees, transfer fees and a bunch of other crap.

I know monthly interest and taxes are deductible, but what about these specific refinance expenses???

Anyone know?

Shawn S

95gt

I was always under the impression that the only thing deductible when refinancing or financing was prepaid points.

Anyone correct me if I am wrong but I think I remember looking into this when I bought my place.

03typeS6spd

unfortunately i think that is correct...

CrockPot

prepaid points is just interest on your mortgage that you are paying in advance...thus, tax deductible. all the other fees aren't, unless the house is income property.

Shawn S

So the GOOD news at closing was that I had no points and now come tax time that’s BAD.

Oh well…..At least my payment went down.

03typeS6spd

no points still probably save more money than the tax saving so either way

edit: me no use no 's' apparently

95gt

^^^^ :imwithstupid:

03typeS6spd

separate question,

if you refinance and pull money out, are you allowed to spend that income on whatever you want? or is it treated as taxable income if you don't reinvest it into the house or another home??

03typeS6spd

either for your own home or other investment properties...

Scrib

And this is why I wouldn't go through a broker to refi (and I hope I'm not offending anyone by saying this)...

At least through traditional lenders, the points you pay are deductible... With brokers, sure... They can give you a great rate, but you certainly pay for it up front, none of which you can deduct...

In the long run... It's the rate that matters as you save a shitpot...

CrockPot

yes, spend on whatever you want...hopefully it's a wise one.

no, it is not taxable income regardless of what you do with it...unless you put the money in positive earning investments.

03typeS6spd

thanks, i didnt mean for stupid purchases, i just meant if i wanted to invest in other areas, stocks, optiosn, cd's whatever, i didn't have to keep it in the real estate realm, one of the guys I work with was telling me you had to... but it didnt make sense

GoDucksCLSPride

Ahh shitpot, Im a broker and you offended me.

As was explained above and per my own daily business acitivities, points are deductible period; regardless of who they come from.

Think of points as synonymous with prepaid interest. Interest is tax deductible, therefore points are tax deductible......as was explained clearly by someone above.


index + margin + points = offered rate

The difference between brokers and retailers is we control our points, retailers have them fixed. Lower or no points mean lower rate as you can see from the above equation. Therefore and as you agree, brokers have a better rate

Im sure you had a well thought out point but you contradicted the hell out of yourself the way your above statement is written.

point taken on the great rate...but the points ARE deductible as explained above

Yes, it is the rate that matters and as you said just above, brokers offer the best rate


There trade off between brokers and retailers is brokers bring more closing costs to the table in exchange for a lower rate. Those costs are just fees from us being a 3rd party and only add up to about $1000 bucks. That pays our rent, liscensing and keeps the lights on.

So really, you've got to ask yourself, would you rather pay $1200 a month on a $200,000 loan through a bank, or $1050 a month on a $201,000 loan through me


*figures above are not a true statement of current rates but rather an example to convey the reality of a typcial transaction comparison.

GoDucksCLSPride

It's tax free cash period. You can do whatever you want with it as they just give you a big check to put in your checking account.

The reason its tax free is because it is not earnings. It is a loan. You increased the value of the loan on your house to cash out some of the equity. You will eventually be making payments on that loan/cash you just pulled, but the interest payements will be cash deductible.

Since its just strait cash, its treated like it too. The tax laws will apply to anything else in the world you would buy with cash. So if your buying CD's, stock options, etc. it would be the same as if you bought them with cash. So look how your laws apply to cash investments and thats your answer.

Tell the guy at work to stfu

03typeS6spd

well it was hard to tell him that when he is the loaded one, with several houses to his name and me with my

he is a really nice (and he happens to be borderline genius) guy, i just think he was confused in the practical application of what i was asking

Scrib

GoDucksCLSPride -

What I gathered from Shawn's post is that he did not pay points, rather must have paid some type of a large commission per his "hefty closing costs" comment.

Point well taken on points... Points, is points, is points...

Speaking of points, here's some for a great post.

clorich

He might have been doing a 1031 exchange...capital gains taxes deferred from a sale but you have to maintain a like-kind investment.

GoDucksCLSPride

thanks buddy

03typeS6spd

but that would only be applicable in a sale correct?, i am sure he was talking about refinancing, because he still has the house, i need to go talk to him again about it, i just haven't been to that office lately...