Refinancing Your Rental Property by Carolyn Flaherty

Mortgage interest rates have been trending downward for many years. As such, many people have taken the opportunity to re-finance their loans to ascertain shorter terms or lower monthly payments. Although you are only allowed to deduct qualified points and interest on your primary residence: you may be able to deduct more from a rental property you own.

The fees associated with the refinance are deducted over the term of the loan. However, if the refinance is done to take equity out of the property in order to make substantial improvements on the property; the fees may be deductible in the year they are paid.

Some of the settlement expenses that can be deducted include the following:

• Abstract fees
• Appraisal fees
• Attorney fees
• Bank fees
• Mortgage commissions
• Notary fees
• Points
• Recording fees
• Title search fees
• Underwriting fees

These amounts can be found on your closing statement and again, should be amortized over the life of your loan.

The remaining balance of charges from the previous loan that were being amortized may be deducted in full the year you refinance if you refinance with a new lender. On the other hand, if you refinance with the same lender, you should deduct your unamortized balance of old charges over the life of the new loan.