Current mortgage is a refinance. How to answer question in Deductions section about refinancing

[keith-greenhill]

Here's the TurboTax Question: Is this (mortgage) loan a home equity line of credit or a loan you've ever refinanced?

Current loan was a refinance after paying down the principal with money from sale of previous house.  Current mortgage is held by a different company than the original mortgage.

So... This current loan has never been refinanced.  But it is also not the original loan to buy the home.  So neither of the3 options seem correct.

[Vanessa]

Since the current load was a refinance, then you would answer YES to has it ever been refinanced. This will take you on the correct path of questions so you can answer the rest of the questions about the refinance balance and amount used to buy, build, or substantially improve your home. 

[acoulombe]

Wait so if you say YES to the loan 2 being refinanced, do you say NO to the original loan being refinanced?

It's confusing because loan 1 is the original loan that was used to take a loan out on the house, but's been refinanced into loan 2.

[DianeC958]

For the original loan on your property you pick Yes, this is the original loan I used to buy or build my home.

For the refinanced loan you pick No, this is a home equity line of credit (HELOC) or a loan that's been refinanced.

If you are entering a second refinance of a loan you pick No, this is a home equity line of credit (HELOC) or a loan that's been refinanced.

@acoulombe

[acoulombe]

Thank you for clarifying Diane! Very helpful. 

[Nate30]

Hi Diane - I had the same exact question, so thanks for clarifying. I’m still running into an issue at the end of the filing review where TT is stating “Limited interest and points must be entered.” This makes me think principals from both the original loan and the refinance loan are being combined somewhere, therefore exceeding $750k, which I think triggers the Limited interest question. Looks like this has been an issue for people in the past. Is it still a TT bug? https://ttlc.intuit.com/community/tax-credits-deductions/discussion/bug-with-refinance-on-a-large-mo...

[DianeW777]

This does not appear to be a bug at this time. It's important to answer the questions appropriately for TurboTax to recognize that one loan is a refinance and the other was the original loan.

If you go through the questions carefully, you should obtain the correct results.  (see the image below for the specific page)

• Helpful link: How to handle multiple Forms 1098

[Nate30]

I’m still running into the issue where TT is defaulting to “Yes” for “Does your mortgage interest need to be limited:”

Both 1098s (for original and refinance loans) show outstanding principle amounts of $415K, which is why I think they’re being added together and surpassing the $750K threshold that triggers the limited interest entry. I can’t access the forms to confirm this. 
Based on the 1098 form instructions below, it seems correct to have $415K on both. 

“Box 2. Shows the outstanding principal mortgage as of January 1, 2020. If the mortgage originated in 2020, shows the mortgage principal as of the date of origination”

One other note... the 1098 for the original loan is a Substitute Form1098. Not sure if that matters. 

Should I just change the Outstanding Principal amount to $0 on the 1098 for the original loan?

[prasad698]

I am having the same issue as well, please help

[MarilynG1]

@Nate30 If your Home Mortgage Interest is being Limited, click this link for more info on an issue with Home Mortgage Interest Limitations that may be affecting you. 

[stretcch]

Thank you I had the exact same question! Diane!

[anaathome]

If my original loan was many years ago, and I have refinanced two times since the original loan, do I have to keep answering yes to the question of was this a refinance of a previous loan? My current 2022 form 1098 has an origination date of 2020 in box 3.

I feel like it would never end if I keep saying yes ever year. 

Thank you for your help

[PattiF]

You do not have to answer "yes" to the question of whether this is a refinance of a previous loan after the first year that it was refinanced. You only answer yes to that question one time in the year following the loan refinance.

[anaathome]

Thank you. The questions are worded weird on this years turbo tax.