- What affects your interest rates?
- Homebuyer Handbook? (printable pdf)
- Shopping for the Right Mortgage
- The Art of Home Purchase Negotiation
- Getting Ready to Move (online checklist)
- Write-Offs to Remember (deductions in the loan process)
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Write-offs to Remember
Deductions in the Loan Process
Write-offs are the government's way of rewarding taxpayers when they've done something the government likes. And to judge by the write-offs, the government likes it when people borrow money to buy a house. There are write-offs aplenty, many of which people often forget.
Make sure your clients take advantage of every break the IRS will give. Here are a few they tend to forget:
Points:
According to the IRS, origination fees charged as points must be paid for the use of money, (for example, to obtain a lower interest rate) in order to be tax deductible. Origination fees that constitute a "service fee" are not tax deductible. The question must be asked, "Does the fee apply to the use of money, or is it a service charge?"
Pre-payment penalties:
Unforeseen circumstances often cause borrowers to pull out of their mortgages sooner than expected. Fortunately, pre-payment penalties are tax deductible, which helps ease the pain.
Pro-rated real estate taxes:
Even if the seller sent the tax collector the check, chances are the buyer paid a pro-rated portion of the taxes for the year at closing. Be sure they know to deduct their fair share.
Pro-rated mortgage interest:
Depending on when in the month the home sale closes, buyers pay either a hefty or a tiny amount of pro-rated mortgage interest for that month. Big or small, they can write that off. The Final Closing/Settlement Statement will show just how much they're due.
Home construction loan interest:
As long as the construction period doesn't last more than two years before they make the new place their "principal residence," they can write off the interest for that construction loan.
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