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Deductible
mortgage interest is interest you pay on a loan
secured by a main home or second home. These
loans include:
- A mortgage
to buy your home
- A second
mortgage
- A line of
credit
- A
home-equity loan
If the loan is
not a secured debt on your home, it is
considered a personal loan and the interest you
pay isn't deductible.
Is My
Dwelling Considered a Home?
For the IRS, a
home can be a house, condominium, cooperative,
mobile home, boat, recreational vehicle, or
similar property that has sleeping, cooking, and
toilet facilities.
Your home
mortgage must be secured by your main home or
your second home. You can't deduct interest on a
mortgage for a third home, a fourth home, and so
on.
What If I
Refinanced?
If you had a
grandfathered mortgage and refinanced it, the
mortgage balance replaced by the new mortgage
remains grandfathered.
Example: Your principal mortgage
balance on October 13, 1987 was $51,000. On
April 15, 1989, you borrowed $101,000. You used
that money to pay the existing loan (which had a
balance of $49,000) and all your credit cards,
then used the rest of the loan proceeds to buy a
new car. Of the total amount borrowed, $49,000
is grandfathered and $52,000 is a home-equity
loan. If this is your only mortgage debt, then
all the interest remains deductible.
Why should I
refinance my mortgage?
In general,
there are three main reasons to refinance your
mortgage:
- Get your
monthly payments lower.
- Get your
mortgage paid off faster.
- Get to
take cash out of your property.
The term of
your mortgage and Interest rates can affect your
decision. With our refinance analysis tool you
can get help to decide if now is the right time
to refinance.
What costs are
involved in refinancing?
Costs can be
separated into three different categories:
- Lender
fees. Fees may include origination,
application, points, appraisal, and credit
report.
-
Third-party fees. These fees vary according
to state and the specific company you choose
to close your loan. They may include fees
for closing, title insurance, title exam,
and recording.
- Pre-paid
items. These are items taken at the time of
closing but are not usually considered
costs. These include items you paid for
whether or not you refinance (for example
taxes, interest, and hazard insurance).
All together,
closing costs usually can range from 2% to 3% of
your loan amount. You will be given an estimate
of your closing costs shortly after your
application has been received. Any prepayment
penalty on a loan being refinanced will raise
the amount needed to close. If there is enough
equity in the home, your closing costs may be
included in your new loan amount to keep your
out-of-pocket costs as low as possible. If you
change the product type or loan amount the
estimated closing costs will change. If this
should occur, be sure to ask how the changes
will effect your closing costs.
Be careful of
lenders who estimate low to get your business.
How much
equity is needed to refinance?
At least 10%
equity in your home by most refinance loan
programs is required to refinance. There are
also 100% L.T.V. Programs available for
qualified borrowers.
Can I
combine more then one loan when I refinance?
You can
refinance any number of loans as long as there
is available equity. (Note: You may be subject
to prepayment penalties if your loans are paid
off too quickly)
What if my
home is for sale?
As long as your
home has not been for sale within the last six
months you can refinance.
How can I
lock an interest rate?
You have to
complete a full mortgage application if you want
to lock in a rate. After you submit a
prequalification online, a Trump Mortgage, LLC
mortgage consultant will call you to discuss
your mortgage options. They will also help you
complete the application and lock in a rate when
you’re ready.
What happens
at closing?
The refinance
closing is done the same way your loan was
closed when you originally purchased your
property. At closing, after your loan is
approved, you'll be getting copies of documents
you'll need to sign. The closing takes place at
the office of a closing agent or it may involve
a meeting where all related parties are present.
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