Is Refinance an option?

Now is the time to think about refinancing your home before the expected interest rate hikes kick in. However the tax side of refinancing requires a close look since the rules differ significantly from the rules that apply when taking out a mortgage to purchase a new home. For example if you pay points on a refinanced home loan they are not fully deductible up front as they are on a mortgage to purchase a new home. Instead the points paid on a refinanced home mortgage loan must be amortized over the term of the new loan. Additionally you will have to keep track of the deduction yourself since it is not listed on your Form 1098 that you receive at year end from your mortgage company. If you are using a paid preparer or using your own tax software to prepare your return the software will usually track this for you and carry the unamortized points over from year to year. Also it is important to note that if you sell your home while amortizing the points any remaining unamortized points become fully deductible in the year of sale. Also it is important to note that if you refinance for a second time then you are able to deduct the balance of the unamortized points from the first refinance usually unless you refinance from same lender. If this happens then you are required to add the points from the second or latest refinancing to the unamortized points from the first refinance and write them off over the term of the new loan.