upfront MIP

i recently refi i payed 3206.00 upfront mip with no monthly mip the agent told me i would get all of it back i am on disability and my checks are tax free i dont pay income tax how do i get any money back

Hi mario,

You need to contact the agent immediately in order to get your money back.

Thanks

I'm pretty confused about this too. Seems like even the professionals are not sure. Some say that if it is a prepaid lump sum then you must divide by 84 and multiply by months of year you paid mortgage. Others say deduct all in year paid.

Now the latter sounds best to me :) But the reasoning is sound also. With the divide by 84 method that refers to private mortgage insurance where you are paying the entire premium, with no monthly payments after. For FHA loans there are two payments, the Mortgage Insurance Premium (MIP) and an Up Front Mortgage Insurance Payment (UFMIP). The MIP is the monthly payments made after.

Now, after some research I found that years ago there would be a refund if mortgage was terminated within 7yrs (84 months :) Then it was reduced to 5yrs. Then it was stopped altogether unless it was refinanced with another FHA, and that was only up to 3yrs.

So...as I see it, it is a one time payment for mortgage insurance and I will deduct in the year it was paid regardless of whether I financed it as it was still paid. Just like I will pay for my insulation on credit card but still claim it for this year.

I spent 40 minutes this evening on the IRS helpline discussing this very issue and Publication 936. The final conclusion was that was all fully deductible in the year paid and, unlike my discount points, it did not have to be rateably adjusted over the term of the loan (or 84 months). I was told it would be treated the same as mortgage interest. My assumption is that speaking with the IRS is preferable to speaking with FHA in regards to resolving the tax implications of the upfront fee.

I agree with you...You're absolutely correct :-)

I'm in the same situation. The IRS really needs to clarify the difference between "upfront" and "prepayment." My assumption is that this is a one time expense, since the definition of a prepayment is an asset that offers future benefits. If the UPMIP is not relieving you of your monthly expenses (i.e the future benefits of a prepayment) then, you pretty much paid a one time expense.

My mortgage company sent a revised 1098 showing the upfront premiums paid at closing. I researched the IRS website & could find no clear answer as to if the full amount was deductible. I called the IRS & she went through a series of questions. It was determined that the upfront premiums were fully deductible due to the mortgage company reporting them in box 4 of the 1098