Mortgage Interest - Form 1098

Forum|Forum|6 years ago
January 23, 2020
1 reply
0 views

During 2019 I made 14 monthly mortgage payments which included principal, interest and escrow amounts. However, although the Form received from my mortgage company listed in the section entitled 2019 Interest Detail the full amount I paid in those 14 payments, block #1 on the form contains only interest paid for 12 payments. From the total paid, they have subtracted Prepaid Interest (current year) and 2019 interest applied (prior years). Is this appropriate or should I go back to the company and ask for a revised Form 1098 to reflect what I actually paid during 2019? Any explanation I can understand would be very appreciated.

NCPERSON1

the loan servicer is correct.

technically when you make a payment in advance, it's really ALL principle; there is no interest. The servicer is just holding your money waiting for the interest to accumulate (you are giving them free money!!).

there are only 365 days in the year and the interest to be paid is on the same 365 days. For example, you can't make 24 months of payments this year and none next year to manage your deductions so you can itemize this year and take the standard deduction next year. IRS doesn't permit that.

(as I used to work for a servicer, if you paid more than 1 month ahead, the servicer would return the money as it was not yet due!) and otherwise would consider it a principle paydown if the instructions with the payment so stated.