Discussion:Negative Amortization Mortgage
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Discussion Forum Index --> Advanced Tax Questions --> Negative Amortization Mortgage
Discussion Forum Index --> Tax Questions --> Negative Amortization Mortgage
| 3 August 2009 | |
| In a negative amortization mortgage, can the deferred interest that is added to the principal balance each month be treated as home acquisition indebtedness? Client is already over the $100,000 limit on home equity indebtedness.
I understand that the deferred interest cannot be deducted until it is paid. | |
Harry Boscoe (talk|edits) said: | 3 August 2009 |
| "Can the deferred interest ... be treated as home acquisition indebtedness?"
No, because the debt proceeds weren't used to pay for the residence or improvements to it. | |
| 3 August 2009 | |
| Interest accrued prior to February 2, 1994 was treated as home acquisition debt, but was not included in computing the $1 million limit. Reg ยง1.163-11T(b).
Interest accrued after that date is treated as home equity indebtedness. TD 8517. | |
| 3 August 2009 | |
| This is an unfortunate result, isn't it?
You could extend it to refinancing. If I have a $500K mortgage incurred at original purchase & then refinance, paying $20K in closing costs & now owe $520K, then perhaps the original purchase debt remains the $500K, and the $20K is home equity financing since it wasn't used to purchase the residence. But, the same $20K closing costs incurred when the house was bought would be original purchase debt. I think we've discussed this issue with varying conclusions. | |
Harry Boscoe (talk|edits) said: | 3 August 2009 |
| I'm appalled. | |
