What does this mean: Were all loan proceeds used to purchase, build, or improve this home?

[jeffbfast777]

My mortgage has been refinanced once, and before and after that, my mortgage has been sold, and sold again. I just make my payments, that is all. I have never taken any home equity loans on it, or anything like that. I do not understand what this question means, or how to answer it !

[jeffbfast777]

The complete question that I meant to post is:

What does this mean: Were all loan proceeds used to purchase, build, or improve the home secured by this loan

[JohnW152]

This means that you can only deduct mortgage interest when you’re using the loan to do work on the same house that is securing the loan.  The loan must be secured – meaning the lender has a guarantee of payment – by the property that the improvements will be used for.

If you use part of the loan to pay for things other than the home that’s securing the loan, you cannot deduct the interest.

Examples of common ways you might have use the money for things other than are:

• Making a down payment on a different home

• Funding improvements on a different home

• Making a payment on a different loan or debt

• Having miscellaneous large purchases

Please see the TurboTax Help article Can I deduct my mortgage? for more information.

[Ljensen1055]

My was a refinance loan so what does it mean?

[Ljensen1055]

Mine was a refinance loan so? It says in parentheses if it’s a refinance to see help. See help where?

[KrisD15]

It means, if you refinanced, did you take any cash out? 

If NO, then the answer is "Yes" it was used to purchase, build or improve the home BECAUSE the loan amount is the same, it is the remainder of what you borrowed to obtain the house. Only the interest rate may have changed which is not a concern.

If YES (you took out cash), then your loan amount has changed.  If you had 90,000 left on the mortgage loan and you refinance to a 100,000 loan, well you just borrowed 10,000 more than you needed to stay in that home. 

THEN the question becomes "What did you do with that additional 10,000?".

If you applied the 10,000 towards the house, (such as adding a room) then that 10,000 becomes part of the loan for the house and you can deduct ALL the interest on that loan. Then "Yes" used to purchase, build or improve". 

If you applied that 10,000 to pay down credit cards or purchase a car, then NO, that 10,000 as not used to purchase, build or improve your home IN WHICH CASE the interest on that loan must be pro-rated between the original loan and the 10,000 cash.