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Prepayment Penalty
Old 02-01-2006, 02:52 PM   #1
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Prepayment Penalty

Okay, I just read on the IRS site regarding prepayment penalties. World Savings charged us $6600 when we refi'd with Union Bank. I'd like to take this as a deduction. Do I have to wait for something from World Savings or can I use my final closing statement as back-up for this deduction?

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Re: Prepayment Penalty
Old 02-01-2006, 03:09 PM   #2
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Re: Prepayment Penalty

I'd imagine a final closing statement would be good roof if you were ever challenged. Don't know what you might need to file, though.

Just curious: why was there a prepay penalty? Was this some kind of funky loan?
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Re: Prepayment Penalty
Old 02-01-2006, 03:09 PM   #3
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Re: Prepayment Penalty

Quote:
Do I have to wait for something from World Savings or can I use my final closing statement as back-up for this deduction?
No and Yes.

Keep in mind that if ths is your personal residence and not a rental then only the "points" are deductible not the entire refy closing costs.
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Re: Prepayment Penalty
Old 02-01-2006, 03:18 PM   #4
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Re: Prepayment Penalty

It's not for closing costs, it's for a prepayment penalty charged by the disposed lender.
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Re: Prepayment Penalty
Old 02-06-2006, 08:26 PM   #5
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Re: Prepayment Penalty

Maybe I'm off base, but I haven't seen a prepayment penalty in loan doc's for years ... was this a very old loan?
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Re: Prepayment Penalty
Old 02-07-2006, 08:51 AM   #6
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Re: Prepayment Penalty

Me neither.
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Re: Prepayment Penalty
Old 02-07-2006, 01:54 PM   #7
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Re: Prepayment Penalty

I have a 4 year old mortgage and it has a pre-payment penalty clause in it too. I can't remember the specifics of it but it is clearly in there but by the time I saw the loan paperwork it was too late to go get another mortgage so I am stuck with it.
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Re: Prepayment Penalty
Old 02-07-2006, 02:12 PM   #8
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Re: Prepayment Penalty

Cube, I missed this thread until now. It is possible that when you receive your 1098 for interest you paid for the year that the prepayment penalty will be on that form. Or it might not. In any event, keep the closing statement as evidence. You should keep it anyway.

Prepayment penalties for home mortgages are a matter of state law. A number of states bar them.
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