- quote -

Regulation 1.446-5 requires the constant yield to maturity
method for some loans that are required to be capitalized
under Regulation 1.263(a)-5. These constant yield to
maturity rules don't apply to your principal residence.
Although I believe you can use them if you want to.

So constant yield to maturity is available but I would
suggest the difference with straight line isn't worth the
effort.

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JoeTaxpayer wrote:

- quote -

As Herb mentioned, if you refinance with the same lender you
have to add the unamortized points to the new loan. (I
didn't realize that either when I refinanced; talk about a
good way to screw up one's tax calculations!)

In fact, it looks like "straight line" amortization will be
more advantageous than constant yield, so it's definitely
not worth the trouble. Amortizing the points proportionally
to stated interest payments is the most advantageous method,
and that's what I was doing with the 20-year conventional
loan; I have no idea how to go about using that method in
this situation, however.

Thanks for the responses!

--
================================================== ======================
Ian Pilcher i.pilcher[at]comcast.net
================================================== ======================

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

JoeTaxpayer wrote:
- quote -

Not quite correct. If you refinance WITH THE SAME LENDER,
the "old" points are ADDED to the new points (from the
refinance) and then amortized over the new loan term.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

Ian Pilcher wrote:

- quote -

I thought that points which are spread out are simply taken
over the life of the loan, i.e. divide by the term of the
loan. And when you refinance, you can take the balance at
once. I'd ask, given the sum involved, $1600, which if
divided is $80 a year. An amortizing to the interest paid,
might double that up front, granted, but is it worth all the
math and additional record keeping? JOE

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I am looking for information on amortizing mortgage points
using the constant yield method.

Background:

I originally purchased my house on 11/30/2001. I financed
the purchase with a 20-year fixed rate loan; the face amount
of the loan was $166,000, and I paid 1.280 points
($2,124.80). Because I purchased the house late in the
year, it was not advantageous for me to itemize my
deductions in 2001, and I have been amortizing the points in
proportion to the stated interest payments.

(This amortization method is allowed for de minimis OID.
Some readers may remember the argument in this newsgroup
about whether mortgage points are OID. Publication 936 has
been updated to specifically state that they are.)

Earlier this year, I refinanced my first mortgage with a 5/1
ARM from the same lender; the face amount of this loan was
$151,295, and I paid 1.054 points ($1,594.65). There are
also $1,565.15 unamortized points from the original loan.

I am also making significant principal prepayments on the
new loan.

The information I've found on the IRS site so far only
convers constant yield calculations for "non-installment"
loans. I can't find anything on installment loans, let
alone an ARM with prepayments.

Any hints on where to look would be appreciated.

Thanks!

--
================================================== ======================
Ian Pilcher i.pilcher[at]comcast.net
================================================== ======================

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >