Did you know that when refinancing your mortgage, some of the costs may be deductable on your Federal income tax return? Its true, so read on.

If your refinancing loan will require you to pay points as part of the loan package, the points may be deductable. A point is a payment you make upfront equal to 1% of the loan value. By paying a point, you lower your rate of interest on the loan. So if you have a $150,000 loan and you are paying 1 point you'll pay $1,500 and the lender will reduce your interest rate

Points paid to obtain an original home mortgage deductible in the year you paid them. However, points paid to refinance a home mortgage usually must be deducted over the life of the loan. If part of the home loan is used to improve the home, and a few other requirements, then the points are fully deductable. For more information on the deductability of interest points, see the Internal Revenue Service web site.

If you have decided to refinance your mortgage, remember to compare different web sites to find the best terms and conditions for you. And don't forget to shop locally. Your home town bank may have better rates than you can find on the Internet.

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