How has the new tax bill affected refinancing? I’ve got the answer right here.
Looking to sell a home in Southern California?
Looking to buy a home in Southern California?
How are refinances affected by the new tax laws?
Recently, I was sitting down with a family member discussing whether they should move into a new home that was already fixed up or if they should refinance and take money out to fix up their house. In their particular case, it may make sense to stay where they are, but if you’re in a similar situation, I’d be happy to sit down with you and go through the information and see what your options are.
One of the things The Tax Cuts and Jobs Act changes is how the mortgage interest deduction is affected. It is still possible to refinance and pull cash out of your home if you’re making significant improvements to your home and you write off the mortgage interest.
You can no longer deduct the mortgage interest on cash-out refinances unless it’s being paid out to make significant improvements on your home.
If you’re just looking to consolidate some debt or pay off some credit cards or medical bills, you can absolutely still do a cash-out refinance on your home and pull that money out. Chances are that the interest rate is going to be lower for the debt you’re paying down. However, you can no longer deduct the mortgage interest on cash-out refinances unless it’s being paid for to make significant improvements on your home.
Let’s say that you have a mortgage for $400,000 and you want to pull out $100,000. $50,000 of that will go toward paying off some debts, and the other half will go toward fixing up your home. In this situation, you’d only be able to write off that $450,000 mortgage interest, not the additional $50,000.
It can get a little bit complicated, so be sure to check with your accountant or CPA when you’re doing your taxes to make sure that you’re doing it correctly.
If you have any questions or want to see if either refinancing your home to make repairs or making a move is the better option for you, feel free to reach out to me. I’d be happy to look at those numbers for you.
