Refinance Your Home and Deduct the Costs


The housing market went through a boom period for much of this decade. As we all know, it is now in the bust phase. The pressure on the markets is leading to seriously cheap money as the Federal Reserve lowers rates again and again. This means it might be time to refinance.The old investment adage is to be conservative when people are being greedy and be greedy when people are being conservative. The finance markets this decade have been a perfect example of how this works. Built on a house of cards, the real estate and stock market bumped up dramatically for much of the decade. Sooner or later, it was going to go bust. It did and we see the carnage of banks failing, homes going into foreclosure and the stock market in tattered shreds.With things being a total disaster, now might seem like the worst time to start playing with your finances. In truth, there has been no better time in a very long time. Just look at Warren Buffet buying up stock right and left for prices not seen in 30 years! Oh, to have a pool of money now to invest!As a homeowner, you should be taking a close look at your mortgage. It might be time to refinance. Why? The Fed is trying to get money moving in the banking industry again. To do this, it has lowered the rates to historic lows and is now talking about lowering the rate banks can borrow from it to zero percent. Yes, the Fed is talking about giving banks no-interest loans. Think about that for a minute! How do you think it is going to effect the interest rate on mortgages? Down they go, which makes refinancing an attractive option.As an added benefit, the act of refinancing can help reduce your taxes. How can this be? Well, you get to deduct certain costs associated with the original loan. It all comes down to those points you had to pay.When you originally obtained a mortgage, did you have to pay points on the loan? If so, the refinancing of that loan triggers a deduction for the amount you paid. The points are usually deductible over the life of the loan, but the refinancing has reduced the life of that original loan from 30 years to the time you refinanced. This means the points are now paid off and you can deduct the remaining balance. It is somewhat technical, so make sure to speak with your accountant. The bigger point to take away from this, however, is you can get a health tax deduction which can help in a year when the economic picture is fairly ugly.Given the state of the economy and markets, you might want to hide your head in the sand when it comes to financial issues. Don’t! There are a ton of opportunities out there that could result in huge wealth building opportunities for you.