Posted on: 05th Mar, 2007 03:21 pm
are fees and costs charged by the lender as notary fees, preparation cost for deed of trust, appraisal fees deductible as points?and if my mortgage ends early, what happens to the balance points if I spread the deduction for points over the life of the mortgage?another thing, are rental payments deductible as mortgage interest before final settlement on the purchase?duntemann in Maryland.
hi duntemann,
welcome to mortgagefit forum.
the fees and costs charged by the lender as you mentioned cannot be deducted as points in the year they are paid or over the life of the loan. and if your mortgage ends early because of prepayment or refinance then you can deduct the remaining balance points in the year mortgage ends.
let me give you one example, suppose jeff had paid points amounting to $3000 in 1997 and had to spread it out over the 15 year total term of the mortgage. by 2006, he had deducted $2000 of these points. ($3000 spread into $200 equal division each year for the total mortgage term of 15 year, in 10 years (by 2006); he had paid $2000 – $200 x 10 years).
if jeff pays off his mortgage in full in 2007, then he can deduct the left $1000 of points in 2007.
colin
welcome to mortgagefit forum.
the fees and costs charged by the lender as you mentioned cannot be deducted as points in the year they are paid or over the life of the loan. and if your mortgage ends early because of prepayment or refinance then you can deduct the remaining balance points in the year mortgage ends.
let me give you one example, suppose jeff had paid points amounting to $3000 in 1997 and had to spread it out over the 15 year total term of the mortgage. by 2006, he had deducted $2000 of these points. ($3000 spread into $200 equal division each year for the total mortgage term of 15 year, in 10 years (by 2006); he had paid $2000 – $200 x 10 years).
if jeff pays off his mortgage in full in 2007, then he can deduct the left $1000 of points in 2007.
colin
I would add that if you are going to refinance your mortgage with the same lender then you cannot deduct the balance of the spread points. But you will have to deduct the balance points over the term of the new mortgage.
" are rental payments deductible as mortgage interest before final settlement on the purchase?"
If you are living in a house before final settlement on the purchase, then the payments you would be making will be considered as rent instead of mortgage interest.
However, if you purchase you home subject to a ground rent then it is considered that you are leasing the land on which your home is located instead of buying it. And if you make periodic or annual rental payments on a redeemable ground rent then it can be deducted as mortgage interest.
If you assume an obligation to pay a fixed amount each year on the property then it is considered as ground rent.
In addition a ground rent is considered as redeemable ground rent if all the conditions are satisfied:
Miller
If you are living in a house before final settlement on the purchase, then the payments you would be making will be considered as rent instead of mortgage interest.
However, if you purchase you home subject to a ground rent then it is considered that you are leasing the land on which your home is located instead of buying it. And if you make periodic or annual rental payments on a redeemable ground rent then it can be deducted as mortgage interest.
If you assume an obligation to pay a fixed amount each year on the property then it is considered as ground rent.
In addition a ground rent is considered as redeemable ground rent if all the conditions are satisfied:
- The lease including renewals periods is greater than fifteen years.
- You hold the rights to freely assign the lease.
- As per state laws you have the rights to end the lease & buy lessor’s entire interest in the land by making payment of a certain amount.
- Lessor holds interest in the land primarily as a security interest to protect his entitled rental payments.
Miller