Sounds like they credited 13 payments in the $5900 year
and 11 interest payments in the $4900 year. A web
amortization calculator shows $5487 and $5414 for
the first two years, i.e. right down the middle.
The may have credited one of the "prinicpal" payments
made in Dec as an advance payment in January.

Depending on when checks are cashed, you can accelerate
or retard *one* payment's interval of interest a year.
That means you can be credited for 11, 12, or 13 months
of interest in a calendar year. IN the long run it averages
to 12.

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1raida wrote:

- quote -

No, it's not a tax question, per se, it's more simple math.
But not so simple. There are different ways to make a
payment, and different (legal) ways for the bank to apply.

You said you made two extra payments to principal, but from
the rest of your post, it's clear to me the bank simply
applied those payments as though you paid the January and
February payment early. Since the interest on 90,000 for the
year would be $5175, having gotten a statement showing $5900
interest paid is what tells me they did this. To be clear,
you need to find out if you're now making the next payment
(i.e. one due 2 months hence) or if there was a mistake.
This is a common issue when the bank doesn't take the money
and apply it directly to principal. If I read all this
correctly, your next payment is likely due in June and you
can now use the money you'd pay in April and May and advise
these payments are 'principal only'. Once squared away,
you'll pay about $7 a month less interest, more principal.
(BTW, 5900 + 4900 total 10,800, about right for the two year
total)

JOE

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"1raida" <raidalife[at]yahoo-dot-com.no-spam.invalid> wrote:

- quote -

Here's a simple check you can run on your excel: what was
the mortgage balance before your first payment of 2004;
subtract the mortgage balance after the last payment.
Subtract that amount from the total payments you made in the
year (excluding insurance and tax escrow payments). If that
doesn't agree with the 1098, I'd use the calculated amount,
not the 1098, and you've got the calculation to support it.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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1raida wrote:

- quote -

You don't specify the term of the loan, nor do the numbers
quite add up, but the CORRECT way of calculating the
interest you paid to the bank is to take the balence at the
end of 2004, subtract the balence at the end of 2003 (you
DID keep the YE statement from 2003, didn't you), and add
back in the payments credited during 2004. That difference
is the interest you should claim for 2004, regardless of the
number on the 1098.

If the bank miscalculated the interest, you can still only
deduct what you actually paid.

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Not really a tax issue, but sort of. I owe $90,000 on a
$96,000 mortgage taken out in 2002 at a fixed rate of 5.75%.
Last year I made 2 extra mortgage payments to principal
($1200 total). In 2003 I paid $5900 in interest, of course
being able to deduct it on my taxes. Last year, the bank
holding my mortgage states that I only paid $4900 in
interest. Sounds good but I don't get it! Are they telling
me that by making 2 extra payments last year decreased the
amount I paid to interest by $1000!? That's $83 a month! I
ran amortization schedules on excel and it shows a decrease
of only $7 a month, not $83.

I called and asked for answers - they told me I had to pay a
fee for them to run a report. Does this make sense to you
all? If this is the case, I should make 2 extra payments
this year and next, and maybe pay no interest for the
remainder of my loan. Yeah right! What gives - can it be
possible to pay a thousand dollars less in interest in only
the third year of my loan just because I made some extra
payments? Help!

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