Will a interest only mortgage loan effect my federal tax return?

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I refinanced in 2008 to an interest only mortgage. I paid alot more interest this year but I’m getting alot less money back on my taxes.

  1. Reply
    January 25, 2011 at 6:31 pm

    No – you still get to deduct the mortgage interest and points (if any) if you itemize.

  2. Reply
    January 25, 2011 at 6:53 pm

    It will not affect your taxes. You will pay slightly more interest (assuming the APR is the same as your previous lone) because you will not be paying down the principle. If you APR is less with the refinance, then you will be paying less interest. Something else is causing your return to be less. Check you work carefully. If the amount is significant, you would consult with a tax adviser, like H&R Block.

  3. Reply
    January 25, 2011 at 7:14 pm

    Dear Sandy: Did you make more money last year? If you paid more interest with the same income and your with holding is the same your refund should be greater. If your refinance included points they are also deductible although on a refinance they must be amortized over the life of the loan. Try the free H&R Block calculator to verify your numbers.

    This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more.
    Errol Quinn Enrolled Agent Master Tax Advisor

  4. Reply
    donald e
    January 25, 2011 at 8:04 pm

    it doesnt and it wont for months to come. and it wont change what u currently have, in the months to come it might lower the mortgage rate a 1/4 to 3/8 of a pt. the trickle down is always slower and less than the cut to the banks. sorry

  5. Reply
    January 25, 2011 at 8:45 pm

    It wont affect it, sometimes it can make it worse. Mortgages are sold like Oil, or Corn ect. They are sold on the open market. If China, Japan ect decide they dont want to buy mortgages anymore the rates go up.

    The Fed doesnt control mortgage rates. The people that buy mortgage backed securities do.

    People that think the Fed controls mortgage rates are wrong. Its like thinking the feds lowered mortgage rates and now the price of corn should go down. Its the same thing.

    Its purely a market decision not a fed decision.

  6. Reply
    Doctor Deth
    January 25, 2011 at 8:56 pm

    it MIGHT affect Adjustable mortgages – ONLY if the mortgage rate is tied to the Fed Funds rate

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