Posted: 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.
Posted: 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.
Posted: 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."
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.
Caron
