Question: We bought our house last year with a mortgage at 8.375. (Unusually high for the time because it was a Jumbo loan.) Naturally, we’re thinking we’d like to refinance.

I’ve been to see our previous mortgage broker, but though she could bring our payments down about $200 a month, I have the feeling we can do better, perhaps without some many “junk fees,” so I want to keep looking. Our credit score is 818, pretty damned impressive, and we don’t have any debt aside from our mortgage.

Any tips on what I should be asking for/looking for?

Answer: Possibly you could pay off the existing mortgage with a home equity loan, which (usually) has absolutely no junk fees. The rate will be be just slightly higher than a mortgage, and you don’t have to pay any points, either. Yes, you can deduct the interest, too, although for some reason the ads always say you * may * be able to deduct. For tax US federal income tax purposes, according to page A-3 of the 2000 1040 Forms and Instructions book, a “home mortgage” is any loan secured by your main or second home. To be a “home”, the place in question must provide basic living accommodations including sleeping space, toilet, and cooking facilities. Home mortgage interest is deductible on Schedule A.

Somehow, a **house** that you own but do not live in, and cannot live in because you rent it out to someone else full time, just doesn’t seem to qualify as _your_ home.

Real estate taxes that you paid on real estate that was not used for business are deductible (page A-2). Again, a house that you rent out to someone else sounds like “business” to me, and those taxes would not be deductible on Schedule A.

Back on page A-3, it’s pointed out that the amount of mortgage interest that may be deductible is not unlimited. In particular, 1. For loans taken out after 10-13-87, if you used the loan proceeds for any purpose other than to buy, build, or improve your home, and the sum of all these loans is over $100,000 (for married filing jointly) at any time during the year, -OR- 2. For loans taken out after 10-13-87 where the proceeds were used to buy, build, or improve your home, and these mortgages plus any mortgages taken out before 10-13-87 total over $1,000,000 (for married filing jointly) at any time during the year, -THEN_ you have to consult Publication 936 to figure out how much you can deduct.

So the ads say you ‘may’ be able to deduct the interest, because, depending on your circumstances, you may or may not be able to deduct the interest on a particular loan.

Rental income, from that house you own, and expenses such as mortgage interest and real estate taxes, go on Schedule E.

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