Tax Question - Loan Origination Fees

[Shawn Miller]

I understand that the loan origination fees are amortized over the life of the loan, so if you get a hard money loan and paid $3000 in origination fees, you would create an amortized asset with a 1 year life span, because its a 12 month loan (thus depreciating all that hard money origination fees in the year the loan was created)?

Then when you refi out of the hard money loan into a 30 year loan you would do the same thing except amortize it over 30 years this time.

Also, what if you are in a 30 year loan with a higher rate and refi to another 30 year loan with a lower rate, do you keep both 30 year loan origination amortized assets going for 30 years, or you can fully depreciate the first 30 year because you have replaced that 30 year asset with a new 30 year asset?

[Ashish Acharya]

Originally posted by @Shawn Miller:

I understand that the loan origination fees are amortized over the life of the loan, so if you get a hard money loan and paid $3000 in origination fees, you would create an amortized asset with a 1 year life span, because its a 12 month loan (thus deducting all that hard money origination fees in the year the loan was created)?

Then when you refi out of the hard money loan into a 30 year loan you would do the same thing except amortize it over 30 years this time.

Also, what if you are in a 30 year loan with a higher rate and refi to another 30 year loan with a lower rate, do you keep both 30 year loan origination amortized assets going for 30 years, or you can fully deduct the first 30 year because you have replaced that 30 year asset with a new 30 year asset?

All the old origination fees can be deducted in the year of refi. So the hard-money loan fees can be deducted when you got the first 30 Year mortgage. And the loan fees for the first financed loan are deducted when you refinanced it again.