Thinking about a home mortgage refinancing before the expected interest rate hikes kick in?
The tax side of refinancing merits a close look. The rules differ significantly from those that apply
when taking out a mortgage to purchase a home.
If you pay points on a refinanced home loan…
They are not fully deductible up front, as is the case with a purchase-money mortgage.
Instead, they must be amortized ratably over the term of the new loan. You’ll need to keep track of the deduction yourself…it’s not listed on Form 1098. Keep in mind that if you happen to sell your residence while amortizing the points, any points not yet deducted can be fully written off in the year the home is sold.
You get a break if you refinance a second time. The later refinancing triggers the write-off of the balance of the points from your first refinancing, usually. But if you refinance with the same lender, you add points on the latest refinancing to leftover points from the first deal and take the amount over the term of the new loan.