Mortgage Points Spread Out - Mortgage paid off early

[slk70]

If I have refinanced and not used the money for improvements on my home, I understand that I would deduct the points over the life of the loan.  If I take out a 15 year loan, I would deduct 1/15th each year.  What happens if I pay off the loan early?  Say I pay it off at year 10.  Would I deduct the remaining points balance all in that last year?

[zomboo]

Yes, you will be able to deduct the remaining points in the year the loan is paid off or refinanced (unless it  refinanced with the same lender). However, since you took cash out and did not use it to improve your home, the mortgage is a mixed-use mortgage. This means that, just like the deductible interest, the amount of that 1/15th of points you can deduct each year will be reduced by the percentage of the cash out portion of the mortgage. With a mixed-use mortgage, principle payments are applied to the cash out balance first so the percentage of deductible points will increase slightly each year.