Mortgage registration period

[streak]

We have bought a house which closed escrow some weeks ago.

We dont have a mortgage but plan on taking one out to try and tie in a low interest rate.

Somebody mentioned to me that there is a 90 day period from close of escrow in which a mortgage must be registered. Implying that if it is after 90 days that you cant get the tax break on the interest.

The mortgage department at the bank has not heard of this.

Can anyone here give me the facts?

Excuse the newbie question, only been in the country for a short time and never done this in the USA before.

Thanks.

[UCGal]

I’ve never heard of this either. I was under the impression that mortgage interest on your primary residence was tax deductable, period.

Perhaps they’re saying the mortgage does have to be recorded… (not registered) within a certain window of it taking place (signing the docs, receiving the $$.) Since most buyers finance the purchase, that usually happens at time of purchase. Perhaps the person that was telling you this got confused.

[SK in CV]

Debt incurred within 90 days of acquisistion of a personal residence can be considered qualified home mortgage debt if it meets all the other requirements. There is no “registration”. Borrow the money, and get the security interest recorded within 90 days of the purchase and you’re good to go.

[UCGal]

[quote=SK in CV]Debt incurred within 90 days of acquisistion of a personal residence can be considered qualified home mortgage debt if it meets all the other requirements. There is no “registration”. Borrow the money, and get the security interest recorded within 90 days of the purchase and you’re good to go.[/quote]
SK – I have a question…

Is it only qualified home mortgage debt if you finance within the first 3 months? What about people who are serial refinancers (cough cough FLU cough cough xboxboy cough.)

Lets say someone starts out with a home purchased for 100k, financed for 80k. Appreciation happens and this person refinances w/ cash out – at 300k… rinse and repeat…. They can still deduct the mortgage interest…?
But another person scrapes together 100k in cash – lets say borrowing from their 401k, or family – to make their all-cash offer sweet enough to beat out other buyers. We all hear about how cash offers are king. They get the house – but don’t finance it till 120 days (more than the 90 days)… At that point they take out an 80k loan. Isn’t their mortgage just as deductable?

The first person extracted money from the house – more than the original purchase price. Yet the interest is still deductable. The second person did not extract the money – just paid back the nice folks who lent them money to make a cash offer.

Does the IRS really look at this 90 day thing?

[streak]

[quote=SK in CV]Debt incurred within 90 days of acquisistion of a personal residence can be considered qualified home mortgage debt if it meets all the other requirements. There is no “registration”. Borrow the money, and get the security interest recorded within 90 days of the purchase and you’re good to go.[/quote]

Thanks SK. I am still not sure I understand. We have no debt currently but wish to take out a mortgage on the property we currently own. Is this the debt you are referring to and if so we need to record this mortgage/debt with 90 days of the close of escrow?

[SK in CV]

[quote=UCGal][quote=SK in CV]Debt incurred within 90 days of acquisistion of a personal residence can be considered qualified home mortgage debt if it meets all the other requirements. There is no “registration”. Borrow the money, and get the security interest recorded within 90 days of the purchase and you’re good to go.[/quote]
SK – I have a question…

Is it only qualified home mortgage debt if you finance within the first 3 months? What about people who are serial refinancers (cough cough FLU cough cough xboxboy cough.)

Lets say someone starts out with a home purchased for 100k, financed for 80k. Appreciation happens and this person refinances w/ cash out – at 300k… rinse and repeat…. They can still deduct the mortgage interest…?
But another person scrapes together 100k in cash – lets say borrowing from their 401k, or family – to make their all-cash offer sweet enough to beat out other buyers. We all hear about how cash offers are king. They get the house – but don’t finance it till 120 days (more than the 90 days)… At that point they take out an 80k loan. Isn’t their mortgage just as deductable?

The first person extracted money from the house – more than the original purchase price. Yet the interest is still deductable. The second person did not extract the money – just paid back the nice folks who lent them money to make a cash offer.

Does the IRS really look at this 90 day thing?[/quote]

Last question first. I have no idea whether the IRS ever looks at it. I’m pretty sure they have no automated mechanism in place to verify it. Lenders are required to file form 1098 for most all secured debt, I don’t think there’s any differentiation between purchase money or other debt.

Beyond that, only purchase money debt qualifies which includes original purchase, debt incurred for substantial improvements, and refinancing that existing debt. Debt that results in cash out doesn’t qualify.

Interest on an additional $100K in debt is also deductible. So if you pay cash, and then finance more than 90 days later, only the interest on the $100K is deductible as home mortgage interest.

That’s the general rules.

[SK in CV]

[quote=streak]
Thanks SK. I am still not sure I understand. We have no debt currently but wish to take out a mortgage on the property we currently own. Is this the debt you are referring to and if so we need to record this mortgage/debt with 90 days of the close of escrow?[/quote]

Exactly, otherwise only the interest on $100K is deductible as mortgage interest.

[spdrun]

^^^

Not necessarily — if you own it free and clear, draw from a HELOC on the property, and use those funds to buy an income-producing investment property, the amount of that debt can be deductible > $100k.

[SK in CV]

[quote=spdrun]^^^

Not necessarily — if you own it free and clear, draw from a HELOC on the property, and use those funds to buy an income-producing investment property, the amount of that debt can be deductible > $100k.[/quote]

Actually, if you borrow it and use all of the proceeds to buy investment property, all of the interest can be deducted as investment interest, irrespective of the amount and the security for the loan.

[spdrun]

That’s what I meant: that the debt is deductible even if it’s greater than $100k. In some other cases, a $100k limit applies.

[SK in CV]

[quote=spdrun]That’s what I meant: that the debt is deductible even if it’s greater than $100k. In some other cases, a $100k limit applies.[/quote]

my mistake, you were exactly right. i missed the >

[Coronita]

FWIW: I think generally borrowing from a 401k is NOT tax deductible per IRC Section 72(p)(3) without more complicated things. Not that you can borrow *that* much from a 401k.

I’m having a bigger issue right now…On a cash out refinance on a rental, I’m hitting two problems.
1. LTV is only 70-75%.
2. Most places won’t do loans smaller than $100k

That kinda sucks because this property I have could still flow decently with a normal loan. And I could reuse the heloc/401k borrowed fund for another property. Looks like I might have to try absolutemortgage or amerisave.

[Author]

Posts