Many home owners are debating the benefits of home refinancing in NJ and yet don’t have all of the facts about how this can be of help to them. There are numerous tax benefits associated with refinancing a home. To make an informed decision as to whether or not this option is right for you, all must be considered.
If you opt to refinance your home for an amount greater than you originally borrowed, the additional amount borrowed may be used to make improvements to the home and tax laws allow you to deduct the amount you pay in points in the first year. Many things qualify as a home improvement, including adding a deck to the home or making repairs to the asphalt driveway. Any interest that is used for other purposes may also be deducted from taxes, but there are limitations to this so it is best to speak to a financial advisor to ensure you understand what may and may not be deducted.
For those who choose to itemize deductions rather than using the standard deduction offered by the IRS, refinancing the home can help to save money. When you first start paying on a home loan, the majority of the payment goes to interest. Again, there are limitations on how much may be deducted, but many will qualify as this deduction may be taken for both home acquisition loans and home equity loans.
When buying a home, the points paid for the home are all deductible the first year, but this isn’t the case when refinancing so many wonder if they will get any tax benefit when doing so. The answer to this is yes as the points may still be deducted. They are just divided up by the number of years the loan will be repaid. For example, if you have a 20 year loan, you would divide the points up by 20 years and take one-twentieth off each year on your taxes. Over time, the savings do add up. If you choose to sell the home before you pay the loan off, the points may all be deducted when you do so.
Consider the above when determining if home refinancing is the right option for you. Many find it is exactly what they need for a number of reasons. The tax benefits are just an added bonus.
Investors Home Mortgage helps people interested in refinancing their homes in New Jersey choose the best loan option that meets their needs.
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