A point is interest that has been pre-paid in an effort to "buy down" the fixed interest imposed on a mortgage. One point is 1% of the mortgage, and can usually lower the interest by .25%.
In a property SALE (not refinance), if Points are pre-paid by the seller, then: Treatment by seller - do not deduct these fees as an interest expense. Seller paid points are a selling expense that reduces the amount realized by the seller. Treatment by buyer - reduce the basis of the property by the amount of the seller-paid points, and treat the points as if the buyer paid them. (For a Home Purchase - Deduct all points as mortgage interest on Schedule A, For a Rental Purchase - Deduct points over the life of the loan on Schedule E) To learn more about how to save on property investments, check out all the resources at TReXGlobal.com Community Relations TReXGlobal.com <http://www.trexglobal.com> Simple FREE to Use Web Tools <http://www.trexglobal.com> for Real Estate Investors
