How are points relating to refinancing accounted for?

September 11, 2002

Subject:  Inquiry on treatment of unamortized point from a refinancing transaction
From:  Edward
Date:  Fri, 16 Aug 2002

Good morning Mr. Gray:

I was very impressed with the credentials on your website and felt you may be able to assist me in generic terms or by directing me to a reference material where I can obtain the answer to my question.

The question involves the treatment of unamortized points from a previous refinancing transaction in November 2001 and how those points could be utilized if I chose to refinance within the next six months. I am a chartered accountant with a home here in the US and my familiarity with the tax rules are somewhat limited.



Date:  30 Aug 2002

Hello Edward,

If you refinance the residence with a different lender, the unamortized balance of the points is deductible as interest as of the date of the second refinancing.

If you refinance the residence with the same lender, you continue amortizing the points over the original term (or until the mortgage is paid off, if sooner.)

Good luck!
Mike Gray

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