Thursday, April 3, 2014

Tax Tip #6 - Mortgage Discount Points

#6 - Mortgage Discount Points

Sometimes people choose to pay a point toward their mortgage upfront at closing so they can get a lower interest rate. Each point is the equivalent of 1 percentage of your loan. This can save you money in the long run, even if it doesn't go toward actually paying off the loan. Many people do this. If you opted to go this route too, you may able to deduct them if you meet all of the following criteria:
  • The loan was used to buy, improve or build the home
  • The loan is secured by your primary residence
  • Paying points is normal where you live
  • The points are calculated as a percentage of the loan principal
  • The points are clearly outlined on the buyer's settlement statement
  • The amount of cash you put into buying your home is as least equal to the amount you were charged for the points you paid on the loan
Also, if you paid points to refinance your home, you are able to deduct a portion of what you paid each year, spread out over the life of the loan. Ask a tax professional for more specific details about this if you need help calculating it for your own specific situation. To learn more about mortgage discount points or any other mortgage-related topics, feel free to call us at 877-828-8851.

Click here to view Tax Tip #5.

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