2006-10-11 11:39:43 · 7 answers · asked by DALE M 1 in Business & Finance ➔ Taxes ➔ United States
Since you posted this question in a tax forum, I assume your real question is whether you can deduct prepaid interest. In general, you cannot deduct prepaid interest in the year it is prepaid, but only in the taxable year it would otherwise have accrued.
2006-10-11 11:55:15 · answer #1 · answered by TaxGuru 4 · 1⤊ 1⤋
Well, there is nothing to be gained by prepaying interest because you are still paying the same amount, it's just sooner, and you lose out on cash flow. As noted above, the better thing to do is use those funds to paydown the principal, which will reduce your interest.
2006-10-11 11:45:21 · answer #2 · answered by aint_no_stoppin_us 4 · 1⤊ 0⤋
The purpose for prepaying is to AVOID having to pay any more interest than necessary as well as cutting back on how many years you're going to have to paying for your house. What you want to do is pay extra on the principal. Sometimes you have to make sure to state that the extra money you are paying is for that purpose. Contact your lender or read the terms or something, but definitely DO NOT PAY ANY MORE INTEREST THAN YOU HAVE TO.
2006-10-11 11:46:37 · answer #3 · answered by Svieta 2 · 1⤊ 0⤋
there are interest only mortgages out there, but aside from that, the rule is that each payment is applied to interest and principal, with the amount applied to interest decreasing each time while the amount applies to principal increases each time. Make one big payment and your interest is gone! (essentially but not really). That's how they get you, because anything above the minimum payment is applied to your principal, but at the same time the amount you owe is significantly going down. Try investing in a CD every so often so you can randomly make large payments. it helps a ton.
2006-10-11 11:47:10 · answer #4 · answered by tozarondanose 2 · 0⤊ 0⤋
Any payments over and above your regular ones should go to pay down the principal. That way you can payoff the overall loan quicker and pay less interest overall.
This assumes that there is no pre-payment penalty in the mortgage contract.
2006-10-11 11:46:08 · answer #5 · answered by Anonymous · 2⤊ 0⤋
Almost always, the 13th payment in a year makes a big difference over the long term !
2006-10-11 12:39:35 · answer #6 · answered by The Advocate 4 · 0⤊ 0⤋
inquire if you can pay extra on the actual principal. this will help you pay off the actual loan faster therefore decreasing the amount of interest you end up paying.
2006-10-11 11:43:01 · answer #7 · answered by Anonymous · 1⤊ 0⤋