A mortgage refinance has some advantages of its own. One of these is the mortgage interest tax deduction.
Saving On Taxes
Being a mortgage borrower, you should already know that your mortgage interest is tax deductible.
You will also have to pay more interest during the early years of a mortgage, as compared to later. But this also means that the more interest you will pay, the higher your deduction will be.
Thus if you replace your current mortgage loan with a refinance, it may lower your tax liability. If you use the refinance to consolidate credit card debt, the advantages would be even more, as this way, you will replace the non-deductible credit card interest with tax-deductible mortgage interest.
Tax Deductions And Refinancing
There are two types of mortgage debt, the home acquisition debt, and home equity debt. Home acquisition debt is the amount that you have to pay to buy the house. When you refinance, the amount of the new loan used to pay off the old loan qualifies as home acquisition debt. However, any amount above that would be home equity debt.
In order to take full advantage of the options available to you, you should contact your tax advisor. Why pay more money, when you have the choice to save.
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