Situation: I bought my house on 5/11/2012 using a VA loan from Navy Federal Credit Union (NFCU). In April 2020, I refinanced my NFCU loan with a VA loan from Finance of America Mortgage LLC (FAM) paying $1,952.72 in points which can be deducted on the federal 1040 Schedule A over the life of the loan (30 years) at a rate of $5.422 per payment. My payments to FAM used Loancare LLC as the servicing agent. I made 7 payments in 2020 which allowed a deduction for points of $37.95. In July 2021, Finance of America transferred the loan servicing to Freedom Mortgage Corporation. In November 2021, I refinanced the existing VA loan (arranged with FAM but now being serviced by Freedom Mortgage) with a new VA loan with Freedom Mortgage. I paid no additional points for the November 2021 refinance.
Questions: Does the servicing transfer in July 2021 count as a ‘mortgage ending early’ event as described in IRS Publication 936? If so, can I deduct the remaining $1,914.75 on my 2021 federal tax return? If not, does the fact that I refinanced the loan being serviced by Freedom Mortgage with a new mortgage from Freedom Mortgage mean that I must prorate the remaining $1,914.75 over 360 months of the new mortgage (for $5.319 per payment)?
No.
The transfer you describe in July 2021 does not count as a "mortgage ending early". Financial institutions selling or transferring loans to another financial institution does not impact the Taxpayer holding the loan.
Yes, since you refinanced with the same Lender, the remaining amount of points will need to follow the refinanced loan and continue to be allocated over the life of the refinanced loan.
According to the IRS:
“If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. However, if you refinance the mortgage with the same lender, you can't deduct any remaining balance of spread points. Instead, deduct the remaining balance over the term of the new loan.”
No.
The transfer you describe in July 2021 does not count as a "mortgage ending early". Financial institutions selling or transferring loans to another financial institution does not impact the Taxpayer holding the loan.
Yes, since you refinanced with the same Lender, the remaining amount of points will need to follow the refinanced loan and continue to be allocated over the life of the refinanced loan.
According to the IRS:
“If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. However, if you refinance the mortgage with the same lender, you can't deduct any remaining balance of spread points. Instead, deduct the remaining balance over the term of the new loan.”