Tax Implications of Mortgage Refinance

[tn0087]

Hi,

I was wondering if anyone has gone through a mortgage refinance while their daycare was open, or if Tom might be able to weigh in on this. Essentially, we are refinancing our mortgage to a lower percentage and switching to a 15 year loan (currently in year 6 of conventional 30 year). Our payment will be almost identical, but I was wondering if this is something I need to account for somehow on my taxes?

There was a closing cost associated with the refinance as well. Is this closing cost a t/s deduction candidate?

Thanks!
Tim

[Unregistered]

Good question! I refinanced from a 30 yr that we were down to 21 years left to pay, back to a 30 year and took extra out to pay for some home improvements.

I was wondering about this also and what we do about the closing costs and appraisals etc that we had to pay....
Tom, help!!

[TomCopeland]

refinancing

When you refinance, you will pay less interest. You are always entitled to deduct the time-space % of your mortgage interest. Nothing else changes with regards to your taxes. Even though your business deduction of mortgage interest is lower, you end up paying less interest overall which is a good thing.

[Unregistered]

More for TOm..

What about the costs associated?? For instance, we paid the appraissal fees out of pocket?

[sunlight]

I tried to refinance back in September. Everything looked great. Until it came to my Schedule C. There in black ink were all my deductions I claimed for the previous year. And yes it looked like a loss. That is the one thing I like about doing home daycare because you have many deductions. However, it is also the one negative thing I don't like about doing home daycare. We ended up not qualifying for the refinance because of the losses. I did write into Tom and he said I could revise my schedule C. Unfortunately the bank wasn't even interested in trying this.

Just my two cents

[Unregistered]

Our refi went great. My advice would be to use someone that is familiar with your business. We have used the same mort. company for years and a few different home purchases and no problems. They ahve to know what to add back in to qualify you like your house pmt, deprec on some items, etc.

[TomCopeland]

appraisal fees

What about the costs associated?? For instance, we paid the appraissal fees out of pocket?

You can deduct any out of pocket expenses associated with the refinancing. Use your time-space %.

[jojosmommy]

I tried to refinance back in September. Everything looked great. Until it came to my Schedule C. There in black ink were all my deductions I claimed for the previous year. And yes it looked like a loss. That is the one thing I like about doing home daycare because you have many deductions. However, it is also the one negative thing I don't like about doing home daycare. We ended up not qualifying for the refinance because of the losses. I did write into Tom and he said I could revise my schedule C. Unfortunately the bank wasn't even interested in trying this.

Just my two cents

Do you have a good mortgage lender? Sounds like you need someone working FOR you who understands your situation. Banks are not good for this. They want clear as day numbers. Look for someone (or get recommendations from friends) who is willing to do the leg work to make it obvious you earn XX amount. We had to provide for example, our bank account statements from the last 6 months showing our income in and out for the business. Yes my income looks low on my schedule C but I have evidence in the form of deposits from daycare accounts that I earn XX each month. My mortgage lender worked through this for us. She was great. It was easy as pie with someone who knew what they were doing.

[sunlight]

I honestly don't know any bank/lender that would be able to help us. Another big negative my lender told me was not only was my income at a loss but because I worked out of my home, that alone would not qualify for a refi. I guess since we are not with Fannie Mae or Freddie Mac we don't really qualify for anything at this time. I remember in the past all you really needed was good credit and you could just show your annual income on paper and that was it! Today, even though we have good credit and make enough money, our hands are tied. If anyone has and idea of a lender/bank that may work feel free to let me know!

Thank you all in adavance

[lilcupcakes09]

We did a refi my 2nd year of daycare, I too was in a loss. At first my lender, who was chase, wanted to use that against our income. After our mortgage broker basically told them we would go elsewhere for help, they changed their tone, finished it up and finalized everything without any other problems.

[Unregistered]

When you refinance, you will pay less interest. You are always entitled to deduct the time-space % of your mortgage interest. Nothing else changes with regards to your taxes. Even though your business deduction of mortgage interest is lower, you end up paying less interest overall which is a good thing.

This is what I found to be true when we refinanced