|
|
 
 |
 |
 |
|
Are Points a Tax Advantage? |
|
The tax code treats points paid in cash differently on
purchase and refinance transactions.
On a purchase transaction, points paid in cash are fully
deductible in the year the loan is closed. On a refinance,
points paid in cash are deductible but the deduction must be
spread evenly over the term. If the points were $3600 and
the term was 30 years, for example, the deduction is just
$10 a month! However, if you pay off the loan early, all
unused deductions can be taken in the year of payoff. If the
loan cited above is paid off after 5 years, for example, a
deduction of $3,000 could be taken in year 6.
Points that are financed, meaning that they are included in
the loan, are treated in the same way on purchases and
refinances. In neither case are they deductible as points.
The loan amount will be higher, and therefore interest
deductions will be greater, but these deductions are spread
over the life of the loan. If the loan is repaid early, much
of the deduction derived from the points is lost.
|
 |
|
 |
 |
 |
 |
|
|
|
|
|
