What are you looking for? 

Is Pre Payment Penalty Amount - Taxable

Author Message
Eddie

Guest







0.10 Dollars($)

PostPosted: Fri Sep 30, 2005 12:42 am    Post subject: Is Pre Payment Penalty Amount - Taxable

I paid a prepayment penalty at the time of refinancing my mortgage.Is this kind of penalty tax deductable?
 
image
Icon Mini Profile Caron
Caron
Moderator

Joined: 19 Jul 2005

Posts: 1451
Location: florida


243.97 Dollars($)

PostPosted: Fri Sep 30, 2005 2:59 am    Post subject: RE:

Hi Eddie

Welcome to the Forums.

Generally a mortgage lender will charge a penalty for the early payment of the loan at the time of refinance. Usually the penalty is only for an early payoff in the first few years of the loan. The prepayment penalty is considered as an interest charge and is deductible in the same way as the underlying mortgage interest.

And similarly, points that have been deducted over the life of the loan would only be deductible in the year that the underlying mortgage is paid off. Although it has an exception, in refinance, points paid must be deducted over the life of the new loan. And which are points paid on the purchase of a principal residence can be deducted upfront.

For example, if it is a home mortgage on your first or second home then the penalty would be deductible on Schedule A as home mortgage interest. But if the loan is for rental property, then the penalty would be deducted on Schedule E.

Thanks,
Caron
 
image
Nics

Guest







0.10 Dollars($)

PostPosted: Fri Sep 30, 2005 11:00 pm    Post subject: RE

If you pay off your home mortgage early and if you're required to pay a prepayment penalty, you may deduct that penalty as home mortgage interest as long as the charge was not for a specific service you received in connection with your mortgage loan.
 
image
Don

Guest







0.10 Dollars($)

PostPosted: Wed Apr 11, 2007 6:11 pm    Post subject: Prepayment penalty of home mortgage

how can i determine when the prepayment penalty of a home mortgage "was not for a specific service you received in connection with your mortgage loan."
 
image
Gervin

Guest







0.10 Dollars($)

PostPosted: Wed Apr 11, 2007 7:07 pm    Post subject:

Prepayment penalty is a charge that lenders requires you to pay if the mortgage is paid off within a certain number of years after if was taken. Usually if the mortgage is paid off within 3-5 years then lender may require you to pay prepayment penalty.

This penalty is not imposed for providing any specific service to you.
 
image
Icon Mini Profile jerry
jerry
Moderator

Joined: 17 Oct 2005



Posts: 814
Location: MICHIGAN


91.18 Dollars($)

PostPosted: Thu Apr 12, 2007 5:06 am    Post subject: RE: prepayment penalty issues

Hi Gervin,

You need to check your loan document and find out the condition under which the lender or the loan company has resolved to demand penalty from you.

Thanks,
Jerry
 
image
Icon Mini Profile SHARLEE2004



Joined: 03 Nov 2006

Posts: 48
Location: Florida


23.63 Dollars($)

PostPosted: Thu Apr 12, 2007 6:07 pm    Post subject:

A Prepayment penalty is 'pre-paid' mortgage interest and is tax deductible in the year it is paid. Check with your tax accountant for more information
 
image
Quick Reply
Your Name
Subject
Message body

All times are GMT - 7 Hours
Page 1 of 1

 
Highlights
Helpful References
Mortgage Guide
Mortgage Terminology
Industry News
Book Center
Shop and Compare lenders
30 Yr. Fixed Vs. 5/1 ARM


Calculators     [View all]
Are you eligible for loan?
How much you can afford?
Calculate monthly payment
Calculate APR


Financial Tools
Credit Repair Tool
Mortgage Planner
Simple Budgeting Tool


Community Rewards
Five simple ways to earn money with the Mortgage Community.

MortgageFit Live Help

Explore the lender near you

Google Map Image

MF Talk

 
About Us  | Contact Us  | Our Blog  | Privacy Policy  | Testimonials  | Website Tools  | RSS Feeds  | Site Map 
We have chosen to apply the Creative Commons Attribution License to all works we publish.
This work is licensed under cc by 2.0