What is the difference between points and origination fees on a refinance?

There are two parts to the origination charges and then it gives a total on the settlement statement from closing. We didn't pay anything at closing- we put it all back into the mortgage total. On my 1098, it only has interest paid.
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    A origination fee is considered points if it is charged as a percentage of the loan amount and is not paying for specified services.  In other words, if the fee is basically an incentive to the bank to make the loan, it is considered points and therefore is part of the interest you have to pay.  If instead the money is for the bank attorney, title search, or other fees for services (but they charge it as a percentage instead of itemizing the fees) then it is not deductible interest.  A full definition is in IRS publication 936,
    http://www.irs.gov/pub/irs-pdf/p936.pdf


    Your 1098 will not show the points because how they are treated for tax purposes varies from person to person.  You would have to determine from your various bank documents whether any of your closing costs were points.  If they are points, you can deduct them by spreading them out over the life of the loan -- you can not deduct points as a lump sum on a refinance.
    • I see Opus' answer which helped greatly! There are some things like title fee, etc. But there is also two other boxes one says "Our origination charge" and gives a $ amount and the other says "Your credit or charge (points) for the specific rate chosen". The second one sounds like it could be the points that can be deducted. Not sure, though
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    At some point when you were looking for financing you will have seen rate information like,
    5% with no points
    4.875% with 0.5 points
    4.75% with 1 point

    etc.  Those are deductible points.  It could be the line you are looking at on the HUD-1 but I don't have a copy in front of me for reference.  Check your other loan documents and contracts, you might have signed a lock-in agreement, for example, that will list the points and should match your HUD-1 if they are the same.

    Your origination fee might or might not also be considered points.  A flat fee ($350 per loan) would not be points but a percentage fee (1/2% of the loan amount) might be.  The full rules are in the publication I linked to.
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