geoff@ism780c.UUCP (Geoff Kimbrough) (09/26/86)
Summary: In article <3788@nsc.UUCP> ken@nsc.UUCP (Ken Trant) writes: >In article <8@oliveb.UUCP> gnome@oliveb.UUCP (Gary) writes: >>What are the ramifications of "taking money out" when >>refinancing your house? >>It looks like a good way to finance major home improvements >>but I am somewhat leary about the long-term effects. > > IRS: Loss of Tax Deductions for refinancing > > The points that lenders charge when you trade in a high-priced mortgage >are one of the major costs of refinancing. Each point is 1% of the mortgage >amount. The IRS is now telling taxpayers that points may not be deducted >in the year they are paid. That position can easily cost you $1000.00 or >more in higher taxes if you refinance this year. > [...] > Home Improvements: > That's just the beginning of the complications. If you refinance for >more than the balance of your mortgage and use the extra cash for home >improvements, you have to split the points for tax purposes. If 15% of >the new mortgage goes for improvements, for example, 15% of the points can >be deducted in the year of the refinancing, with the other 85% deducted in >little chunks over the life of the loan. > [...] >Ken Trant >Real Estate Professionals >415-651-3131 Thank you, Ken for this informative article. I have one more question. What can you do with the points paid if you refinance to withdraw funds to settle a divorce? (As in buying your ex's half of the equity?) Is there any difference or advantage to refinancing the whole mortgage vs. taking out a 2nd? (aside from the obvious interest rate difference) What, then, if you sell soon afterwards. These are not theoretical questions, I know someone who needs to know, and soon. I'm not sure what you mean by "trading in a high-priced mortgage", in this case, the old mortgage has a lower interest rate than is available now. Will this make a difference in the points charged? Also (this is why I cross-posted to net.legal) are there tax differences between a straight sell-and-divide-profits and refinance and get a quit-claim? Both parties are in about the same tax bracket, by the way. advTHANKSance Geoffrey Kimbrough -- Director of Dangerous Activities INTERACTIVE Systems Corporation, Santa Monica California ihnp4!ima!geoff || sdcrdcf!ism780c!geoff || ucla-cs!ism780!geoff I think, therefore I... I umm... er... nevermind.