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With interest rates steadily increasing, more and more borrowers are considering refinancing early into a low rate and paying the prepayment penalty. The strategy isn’t for everyone, and generally only works if the borrower is looking to pull equity out of the property. However, there is one big benefit that seems to fall under the radar: a tax write off. Prepayment penalties are tax deductible in the State of California and at the federal level, meaning that the penalty could be reduced by half for borrowers in the top tax brackets.

Kelsi Maree Borland


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