Mortgage Refinance Tracking: Capitalizing Costs and Amortizing Over the Loan Life

finance_fred · February 1, 2026, 9:26am

I just refinanced my primary residence and spent way too long figuring out how to properly track the closing costs in Beancount. The tax treatment is more complex than I expected - some costs get amortized, some get expensed, and some affect your cost basis. Here’s what I learned.

The Three Categories of Refinance Closing Costs

When you refinance, your closing costs fall into three buckets with different tax treatments:

Amortize over the loan life - Most financing costs (points, origination fees)
Add to property basis - Some costs affect your cost basis (mainly relevant if you sell)
Expense immediately - Very few costs can be deducted right away

My Account Structure for Tracking Refinance

; === REFINANCE TRACKING ACCOUNTS ===
2025-06-01 open Assets:Property:123MainSt:CostBasis           USD
2025-06-01 open Assets:Property:123MainSt:RefinanceCosts      USD
2025-06-01 open Assets:Property:123MainSt:RefinanceCosts:AccumAmort  USD

; === AMORTIZATION EXPENSE ===
2025-06-01 open Expenses:Housing:123MainSt:AmortizedClosingCosts  USD

; === LIABILITIES ===
2025-06-01 open Liabilities:Mortgage:123MainSt:Original       USD  ; Closes out
2025-06-01 open Liabilities:Mortgage:123MainSt:Refinance      USD  ; New loan

Recording the Refinance Transaction

Here’s how I recorded my refinance closing:

; Old loan balance: $320,000
; New loan: $350,000 (cash-out refi)
; Closing costs: $8,750

2025-06-15 * "Title Company" "Refinance closing - 123 Main St"
  ; Pay off old mortgage
  Liabilities:Mortgage:123MainSt:Original          320,000.00 USD

  ; Receive new loan proceeds
  Liabilities:Mortgage:123MainSt:Refinance        -350,000.00 USD

  ; Closing costs breakdown (amortize over loan life)
  Assets:Property:123MainSt:RefinanceCosts          8,750.00 USD
    breakdown: "See detail below"

  ; Net cash received
  Assets:Bank:Checking                              21,250.00 USD
    note: "350000 - 320000 - 8750 = 21250"

; Detail the closing costs for documentation
2025-06-15 custom "refinance-closing-costs" "123 Main St"
  ; COSTS TO AMORTIZE (most closing costs)
  loan-origination-fee: 1750.00      ; 0.5% of loan
  discount-points: 3500.00            ; 1 point to buy down rate
  appraisal-fee: 550.00
  credit-report: 45.00
  flood-certification: 25.00
  tax-service-fee: 85.00
  underwriting-fee: 995.00
  title-search: 350.00
  title-insurance-lender: 875.00
  settlement-fee: 450.00
  recording-fees: 125.00

  total-amortizable: 8750.00
  loan-term-months: 360
  monthly-amortization: 24.31
  annual-amortization: 291.67

Monthly Amortization Entry

Each month (or yearly, if you prefer), record the amortization:

; Monthly amortization
2025-07-01 * "Amortization" "Refinance closing costs - July 2025"
  Expenses:Housing:123MainSt:AmortizedClosingCosts    24.31 USD
  Assets:Property:123MainSt:RefinanceCosts:AccumAmort  -24.31 USD
    remaining-balance: 8725.69
    months-remaining: 359

; Or do it annually
2025-12-31 * "Amortization" "2025 refinance cost amortization (6.5 months)"
  Expenses:Housing:123MainSt:AmortizedClosingCosts   158.01 USD
  Assets:Property:123MainSt:RefinanceCosts:AccumAmort  -158.01 USD
    note: "6.5 months: Jun 15 - Dec 31"
    remaining-balance: 8591.99
    years-remaining: 29.46

The Old Loan’s Unamortized Costs

Here’s something I almost missed: if your old loan had points or closing costs that you were amortizing, you can deduct the remaining balance when you refinance - but only if it’s with a different lender.

; If old loan had unamortized costs remaining
2025-06-15 custom "old-loan-amortization" "status"
  original-closing-costs: 6200.00
  amortized-to-date: 2066.67  ; 10 years into 30-year loan
  remaining-unamortized: 4133.33

; Different lender - deduct remaining balance
2025-06-15 * "Amortization" "Write off old loan remaining costs - different lender"
  Expenses:Housing:123MainSt:AmortizedClosingCosts  4133.33 USD
  Assets:Property:123MainSt:OldRefinanceCosts:AccumAmort  -4133.33 USD
    reason: "Refinanced with different lender - deduct remaining"

; SAME lender - must continue amortizing over NEW loan
; 2025-06-15 * "Rollover" "Old loan costs to new loan term"
;   Assets:Property:123MainSt:RefinanceCosts         4133.33 USD
;   Assets:Property:123MainSt:OldRefinanceCosts:AccumAmort  4133.33 USD
;     reason: "Same lender - continue amortizing over new 30 years"

Tracking the Net Benefit

I like to see my true refinance savings:

2025-06-15 custom "refinance-analysis" "123 Main St"
  ; OLD LOAN
  old-interest-rate: 6.5%
  old-monthly-payment: 2022.00
  old-remaining-interest: 407920.00  ; Over remaining 20 years

  ; NEW LOAN
  new-interest-rate: 5.75%
  new-monthly-payment: 2042.00  ; Slightly higher (larger loan)
  new-total-interest: 385120.00

  ; COSTS
  closing-costs: 8750.00
  cash-out-amount: 21250.00

  ; BREAK-EVEN ANALYSIS
  monthly-interest-savings: 173.00
  break-even-months: 51  ; 8750 / 173
  total-lifetime-savings: 22800.00  ; Net of closing costs

If You Sell Before the Loan Term Ends

When you sell the property, you can deduct all remaining unamortized costs in that year:

; Selling 5 years after refinance
2030-08-15 custom "sale-amortization-deduction" "123 Main St"
  original-costs: 8750.00
  amortized-5-years: 1458.35  ; 24.31 * 60
  remaining: 7291.65
  ; Deduct remaining in year of sale

2030-08-15 * "Amortization" "Final deduction - remaining refinance costs"
  Expenses:Housing:123MainSt:AmortizedClosingCosts  7291.65 USD
  Assets:Property:123MainSt:RefinanceCosts:AccumAmort  -7291.65 USD
    reason: "Property sold - deduct remaining unamortized costs"

Primary Residence vs Rental Property

For my primary residence, these amortized costs go on Schedule A (if I itemize). If this were a rental property, it would be different:

Property Type	Tax Treatment	Form
Primary residence	Schedule A (if itemizing)	1040 Schedule A
Rental property	Schedule E deduction	1040 Schedule E
Rental property	First year: Form 4562	Form 4562

Questions for the community:

How do you handle points when part of the refi is used for home improvements? (I’ve heard you can deduct that portion immediately)
Anyone have a good system for tracking multiple refinances over a property’s lifetime?
For rental properties - do you track amortization separately from depreciation, or combine them somehow?

The monthly amortization entries feel tedious, but having accurate records for tax time makes it worth it.

accountant_alice · February 1, 2026, 9:26am

Excellent breakdown, Fred! As a CPA, I want to clarify the distinction between amortization and depreciation since these terms get confused a lot, and the tax treatment is actually different.

Amortization vs. Depreciation: Why It Matters

Concept	What It Applies To	Recovery Period	Recapture on Sale
Amortization	Intangible costs (loan fees, points)	Loan term	No recapture
Depreciation	Tangible assets (building, improvements)	27.5 or 39 years	Yes, taxed at 25%

This matters because:

Amortized costs give you deductions with no downside - when you sell, you just lose any remaining deduction
Depreciated costs get “recaptured” when you sell - you pay tax on the depreciation you took

Categorizing Your Closing Costs Properly

Here’s my professional breakdown of how to treat each cost:

2025-06-15 custom "closing-cost-categorization" "professional-guidance"
  ; ====================================
  ; AMORTIZE OVER LOAN LIFE (30 years)
  ; ====================================
  ; These are financing costs - intangible

  loan-origination-fee: 1750.00      ; Amortize
  discount-points: 3500.00            ; Amortize (special rules below)
  underwriting-fee: 995.00            ; Amortize
  processing-fee: 400.00              ; Amortize
  credit-report: 45.00                ; Amortize
  flood-certification: 25.00          ; Amortize
  tax-service-fee: 85.00              ; Amortize
  wire-transfer-fees: 50.00           ; Amortize

  ; ====================================
  ; ADD TO BASIS (for primary residence)
  ; ====================================
  ; These affect your cost basis for capital gains

  title-search: 350.00                ; Add to basis
  title-insurance-owner: 1200.00      ; Add to basis
  recording-fees: 125.00              ; Add to basis
  survey-fee: 400.00                  ; Add to basis (if required)

  ; ====================================
  ; NEITHER (pre-paid items, escrow)
  ; ====================================
  ; These aren't closing "costs" - they're prepayments

  prepaid-interest: 850.00            ; Deduct as mortgage interest
  escrow-initial-deposit: 2400.00     ; Not a cost - held in escrow
  property-tax-proration: 1200.00     ; Deduct as property tax
  insurance-prepayment: 1800.00       ; Not deductible (personal)

The Points Exception for Home Improvements

Fred asked about this. If you use part of your refinance proceeds for home improvements, you may be able to deduct that portion of the points in the year paid:

; Refinance: $350,000
; Used for improvements: $50,000 (new roof + kitchen)
; Improvement ratio: 50000 / 350000 = 14.29%

2025-06-15 custom "points-allocation" "home-improvement-exception"
  total-points-paid: 3500.00
  improvement-proceeds: 50000.00
  total-loan: 350000.00
  improvement-ratio: 14.29%
  points-deductible-now: 500.15     ; 3500 * 14.29%
  points-to-amortize: 2999.85       ; Remainder over loan life

2025-06-15 * "Points" "Deductible points for home improvement portion"
  Expenses:Housing:123MainSt:MortgageInterest        500.15 USD
  Assets:Property:123MainSt:RefinanceCosts:Points   -500.15 USD
    reason: "Home improvement exception - IRS Pub 936"

2025-06-15 * "Points" "Points to amortize (non-improvement portion)"
  Assets:Property:123MainSt:RefinanceCosts:Points  2999.85 USD
  Assets:Bank:Checking                             -2999.85 USD
    amortization-period: "360 months"

Tracking Multiple Refinances

When you refinance multiple times, keep each set of costs in separate accounts:

; First refinance (2020)
2020-01-01 open Assets:Property:123MainSt:Refi2020:Costs          USD
2020-01-01 open Assets:Property:123MainSt:Refi2020:AccumAmort     USD

; Second refinance (2025)
2025-06-01 open Assets:Property:123MainSt:Refi2025:Costs          USD
2025-06-01 open Assets:Property:123MainSt:Refi2025:AccumAmort     USD

; When you do the 2025 refi, handle 2020 costs
; Different lender = deduct remaining immediately
2025-06-15 * "Amortization" "Write off 2020 refi costs - different lender"
  Expenses:Housing:123MainSt:AmortizedClosingCosts  5200.00 USD
  Assets:Property:123MainSt:Refi2020:AccumAmort    -5200.00 USD
  Assets:Property:123MainSt:Refi2020:Costs              0 USD  ; Close out
    note: "10 years of 30-year loan remaining = 5200 left"

; Close the old accounts
2025-06-15 close Assets:Property:123MainSt:Refi2020:Costs
2025-06-15 close Assets:Property:123MainSt:Refi2020:AccumAmort

Primary Residence vs Rental: A Key Difference

For primary residences, the amortized points/costs go on Schedule A as “Points not reported on Form 1098.”

For rental properties:

First year you must use Form 4562 to set up the amortization
Subsequent years, report on Schedule E, Line 19 as “Amortization”

; Rental property amortization tracking
2025-06-15 custom "rental-refi-reporting" "456 Oak Ave"
  first-year-form: "Form 4562, Part VI"
  subsequent-years: "Schedule E, Line 19"
  description-on-return: "Amortization - refinance closing costs"

  ; Separate from depreciation!
  depreciation-form: "Form 4562, Part III"
  depreciation-schedule-e: "Line 18"

The key is to track amortization and depreciation separately - they go on different lines of your tax return.

tax_tina · February 1, 2026, 9:27am

Former IRS auditor here. Let me add some compliance details that will keep you out of trouble if you ever face scrutiny.

IRS Rules You Need to Know

The IRS has specific rules about refinance costs in Publication 936 and Reg. §1.446-5. Here’s the practical summary:

Rule 1: Points on a Refinance MUST Be Amortized

Unlike points on a purchase mortgage (which can be deducted in full the year paid), refinance points must be spread over the loan life. The only exception is the home improvement portion Alice mentioned.

2025-06-15 custom "irs-points-rule" "refinance"
  ; PURCHASE mortgage points: Deductible in year paid (if you meet requirements)
  ; REFINANCE mortgage points: Amortize over loan term

  pub-936-cite: "Points paid solely to borrow money must be deducted over the life of the loan"
  exception: "Points allocable to home improvement portion may be deducted in year paid"

Rule 2: The Same-Lender Rule is Real

If you refinance with the same lender, you cannot deduct remaining unamortized costs from the old loan. You must add them to the new loan’s amortization:

; Scenario: Refinance with SAME lender
; Old loan had $4,000 unamortized costs remaining
; New loan has $8,000 in closing costs
; New loan term: 30 years

2025-06-15 custom "same-lender-amortization" "IRS requirement"
  old-loan-remaining-costs: 4000.00
  new-loan-closing-costs: 8000.00
  total-to-amortize: 12000.00        ; Combined!
  new-loan-term-months: 360
  monthly-amortization: 33.33

2025-06-15 * "Refinance" "Combine old and new loan costs - same lender"
  Assets:Property:123MainSt:Refi2025:Costs         8000.00 USD
  Assets:Property:123MainSt:Refi2020:Costs              0 USD
  Assets:Property:123MainSt:Refi2020:AccumAmort   -4000.00 USD
  Assets:Bank:Checking                            -4000.00 USD
    note: "Old unamortized costs roll into new loan amortization"
    total-amortization-base: 12000.00

Rule 3: Documentation Requirements

If audited, you need to prove:

2025-06-15 custom "refinance-documentation" "audit-ready"
  ; Required documents
  doc-1: "HUD-1/Closing Disclosure showing all fees"
  doc-2: "Loan payoff statement from old lender"
  doc-3: "Amortization schedule showing calculation"
  doc-4: "Home improvement receipts (if claiming exception)"
  doc-5: "Prior year returns showing consistent amortization"

  ; Calculation worksheet
  total-amortizable-costs: 8750.00
  loan-term: "30 years (360 months)"
  monthly-deduction: 24.31
  annual-deduction: 291.67
  calculation-method: "Straight-line over loan term"

  ; Keep for 3 years after loan payoff
  retention-period: "Until 3 years after final deduction"

Form 4562 for Rental Properties

For rental properties, you MUST use Form 4562 the first year to establish the amortization:

; Year 1: Set up amortization on Form 4562
2025-12-31 custom "form-4562-reporting" "rental-refinance"
  form-section: "Part VI - Amortization"
  line-42-description: "Refinance closing costs - 456 Oak Ave"
  line-42-date-acquired: 2025-06-15
  line-42-amount: 8750.00
  line-42-code-section: "461"
  line-42-period: "360 months"
  line-42-this-year: 158.01  ; 6.5 months

  ; Transfer to Schedule E
  schedule-e-line-19: "Other: Amortization 158.01"

The Prepaid Interest Trap

A common mistake: treating prepaid interest at closing as a closing cost. It’s not - it’s just mortgage interest:

; From your Closing Disclosure
2025-06-15 custom "closing-disclosure-review" "interest-vs-costs"
  ; This is NOT a closing cost - it's prepaid interest
  prepaid-interest: 850.00
  days-of-interest: 15
  daily-rate: 56.67
  treatment: "Deduct as mortgage interest, not amortize"

2025-06-15 * "Closing" "Prepaid interest portion"
  Expenses:Housing:123MainSt:MortgageInterest        850.00 USD
  Assets:Bank:Checking                               -850.00 USD
    note: "Interest from closing to month-end - NOT closing cost"

Year-End Amortization Report

Here’s a query to generate your tax report:

; Annual amortization summary for tax preparation
SELECT
  LEAF(account) as loan,
  SUM(position) as amortized_this_year
WHERE
  account ~ "AmortizedClosingCosts"
  AND year = 2025
GROUP BY loan

; For rental - also show by property
SELECT
  PARENT(account) as property,
  SUM(position) as total_amortization
WHERE
  account ~ "AmortizedClosingCosts"
  AND account ~ "Rental"
  AND year = 2025
GROUP BY property

When You Can Deduct Everything at Once

There are only a few situations where you can deduct all remaining costs immediately:

2025-01-01 custom "full-deduction-triggers" "refinance-costs"
  trigger-1: "Sell the property"
  trigger-2: "Pay off the loan in full (not refi with same lender)"
  trigger-3: "Refinance with a DIFFERENT lender"
  trigger-4: "Foreclosure or deed in lieu"
  trigger-5: "Convert from rental to personal (lose remaining deductions)"

  ; NOT a trigger
  not-trigger-1: "Refinance with same lender - continue amortizing"
  not-trigger-2: "Partial prepayments"

One more thing: if you convert a rental property to personal use, you lose any remaining unamortized balance. You can’t deduct it. That’s one situation where you want to avoid conversion if you have significant costs remaining.

helpful_veteran · February 1, 2026, 9:27am

I’ve tracked three refinances across two properties in Beancount over the years. Here are the practical lessons I’ve learned and some common mistakes to avoid.

Mistake #1: Forgetting to Close the Old Loan Properly

When you refinance, the old loan gets paid off. Make sure your books reflect this cleanly:

; Check old loan balance before refinance
2025-06-14 balance Liabilities:Mortgage:123MainSt:Original  -320,000.00 USD

; Refinance closes old loan
2025-06-15 * "Title Company" "Refinance - payoff old loan"
  Liabilities:Mortgage:123MainSt:Original          320,000.00 USD
  Liabilities:Mortgage:123MainSt:Refinance        -350,000.00 USD
  Assets:Property:123MainSt:RefinanceCosts          8,750.00 USD
  Assets:Bank:Checking                              21,250.00 USD

; Verify and close old account
2025-06-16 balance Liabilities:Mortgage:123MainSt:Original  0 USD
2025-06-16 close Liabilities:Mortgage:123MainSt:Original

Mistake #2: Not Tracking Escrow Changes

Your escrow account changes at refinance. The old lender refunds your escrow, the new lender collects new escrow:

; Old lender refunds escrow (usually 2-4 weeks after closing)
2025-07-01 * "Old Lender" "Escrow refund"
  Assets:Bank:Checking                              2,847.32 USD
  Assets:Escrow:OldLender:123MainSt                -2,847.32 USD
    note: "Refund of escrow balance after payoff"

2025-07-01 close Assets:Escrow:OldLender:123MainSt

; New escrow funded at closing
2025-06-15 * "Title Company" "Initial escrow deposit - new loan"
  Assets:Escrow:NewLender:123MainSt                 2,400.00 USD
  Assets:Bank:Checking                             -2,400.00 USD
    note: "Property tax and insurance reserves"

Mistake #3: Mixing Up Amortization Schedules

If you’ve refinanced before, you might have overlapping amortization schedules. Keep them organized:

; My system: one custom directive per refinance
2020-03-15 custom "amortization-schedule" "Refi-2020"
  original-amount: 6200.00
  loan-term-months: 360
  monthly-amortization: 17.22
  start-date: 2020-03-15
  ; Status as of 2025
  months-elapsed: 63
  amount-amortized: 1084.86
  remaining: 5115.14
  status: "Written off 2025-06-15 - different lender refi"

2025-06-15 custom "amortization-schedule" "Refi-2025"
  original-amount: 8750.00
  loan-term-months: 360
  monthly-amortization: 24.31
  start-date: 2025-06-15
  ; Current status
  months-elapsed: 0
  amount-amortized: 0
  remaining: 8750.00
  status: "Active"

My Practical Workflow

Step 1: Parse the Closing Disclosure

I always scan my Closing Disclosure and create a detailed breakdown:

2025-06-15 custom "closing-disclosure-detail" "123 Main St Refi"
  ; Page 2 - Loan Costs
  A-origination-charges:
    points: 3500.00        ; Amortize
    origination-fee: 1750.00  ; Amortize

  B-services-borrower-did-not-shop:
    appraisal: 550.00      ; Amortize
    credit-report: 45.00   ; Amortize
    flood-cert: 25.00      ; Amortize
    tax-service: 85.00     ; Amortize

  C-services-borrower-did-shop:
    title-search: 350.00   ; Varies
    settlement: 450.00     ; Amortize
    title-lender: 875.00   ; Amortize

  ; Page 2 - Other Costs
  E-taxes-and-fees:
    recording: 125.00      ; Add to basis
    transfer-tax: 0        ; Add to basis (if any)

  F-prepaids:
    prepaid-interest: 850.00  ; Deduct as interest
    insurance: 1800.00     ; Not deductible

  G-initial-escrow:
    tax-reserve: 1200.00   ; Asset (escrow)
    insurance-reserve: 1200.00  ; Asset (escrow)

  ; Summary
  total-loan-costs: 7630.00
  total-amortizable: 8750.00  ; After review

Step 2: Set Up the Amortization Entry Template

I use a template to make monthly entries quick:

; Template - copy and update each month
; YYYY-MM-01 * "Amortization" "Refinance costs - MMM YYYY"
;   Expenses:Housing:123MainSt:AmortizedClosingCosts    24.31 USD
;   Assets:Property:123MainSt:RefinanceCosts:AccumAmort  -24.31 USD

; Or batch quarterly
2025-10-01 * "Amortization" "Q3 2025 refinance cost amortization"
  Expenses:Housing:123MainSt:AmortizedClosingCosts    72.93 USD
  Assets:Property:123MainSt:RefinanceCosts:AccumAmort  -72.93 USD
    period: "July - September 2025"
    months: 3

Step 3: Year-End Reconciliation

Before tax time, verify your amortization:

; Check amortization balance matches expected
2025-12-31 custom "amortization-reconciliation" "annual"
  original-costs: 8750.00
  expected-amortized: 158.01  ; 6.5 months
  actual-amortized: 158.01    ; Sum of entries
  variance: 0
  remaining-balance: 8591.99

Pro Tip: Track the Interest Rate Spread

I like to track whether my refinance is actually saving money:

; Monthly tracking
2025-07-01 custom "refi-savings-tracker" "July"
  old-loan-interest-would-be: 1733.33  ; What I would have paid
  new-loan-interest-actual: 1677.08    ; What I paid
  monthly-savings: 56.25
  cumulative-savings: 56.25
  closing-costs: 8750.00
  remaining-to-break-even: 8693.75

2025-12-01 custom "refi-savings-tracker" "December"
  monthly-savings: 56.25
  cumulative-savings: 337.50  ; 6 months
  remaining-to-break-even: 8412.50
  months-to-breakeven: 150  ; About 12.5 years at this rate

When It’s NOT Worth Tracking

Honestly, for a primary residence with relatively small closing costs, you might decide the hassle isn’t worth the tax benefit:

2025-06-15 custom "tracking-decision" "cost-benefit"
  total-closing-costs: 8750.00
  annual-amortization: 291.67
  marginal-tax-rate: 24%
  annual-tax-savings: 70.00  ; 291.67 * 24%

  ; Is tracking worth $70/year in tax savings?
  ; For me: Yes, because I track everything anyway
  ; For others: Maybe just expense in year 1 and deal with amended return risk

But for rental properties, you really need to track this properly - the deductions are larger and the IRS pays more attention to Schedule E.

finance_fred · February 1, 2026, 9:27am

Great discussion! Let me pull this together into a complete template and add the queries I use for tax time.

Complete Mortgage Refinance Template

; =============================================
; MORTGAGE REFINANCE TEMPLATE
; Replace "123MainSt" with your property ID
; =============================================

option "operating_currency" "USD"

; === CONFIGURATION ===
2025-06-15 custom "refinance-config" "123MainSt"
  old-loan-lender: "First National Bank"
  old-loan-rate: 6.50%
  old-loan-balance: 320000.00
  old-loan-remaining-costs: 4133.33  ; Unamortized from previous refi

  new-loan-lender: "Better Mortgage"  ; Different lender = deduct old costs
  new-loan-amount: 350000.00
  new-loan-rate: 5.75%
  new-loan-term: "30 years"
  new-loan-closing-costs: 8750.00

  cash-out: 21250.00
  closing-date: 2025-06-15

; === PROPERTY ACCOUNTS ===
2025-01-01 open Assets:Property:123MainSt:Building           USD
2025-01-01 open Assets:Property:123MainSt:Land               USD
2025-01-01 open Assets:Property:123MainSt:CostBasis          USD

; === REFINANCE AMORTIZATION ACCOUNTS ===
2025-06-15 open Assets:Property:123MainSt:Refi2025:Costs     USD
2025-06-15 open Assets:Property:123MainSt:Refi2025:AccumAmort USD

; === ESCROW ACCOUNTS ===
2025-06-15 open Assets:Escrow:NewLender:123MainSt            USD

; === MORTGAGE LIABILITIES ===
2025-01-01 open Liabilities:Mortgage:123MainSt:Original      USD
2025-06-15 open Liabilities:Mortgage:123MainSt:Refi2025      USD

; === EXPENSE ACCOUNTS ===
2025-01-01 open Expenses:Housing:123MainSt:MortgageInterest  USD
2025-01-01 open Expenses:Housing:123MainSt:AmortizedCosts    USD
2025-01-01 open Expenses:Housing:123MainSt:PropertyTax       USD
2025-01-01 open Expenses:Housing:123MainSt:Insurance         USD

Master Refinance Transaction

; === THE REFINANCE CLOSING ===
2025-06-15 * "Title Company" "Refinance closing - 123 Main St"
  ; Pay off old mortgage
  Liabilities:Mortgage:123MainSt:Original          320,000.00 USD

  ; Receive new loan
  Liabilities:Mortgage:123MainSt:Refi2025         -350,000.00 USD

  ; Record closing costs (to amortize)
  Assets:Property:123MainSt:Refi2025:Costs          8,750.00 USD

  ; Net cash received
  Assets:Bank:Checking                              21,250.00 USD

; === PREPAID INTEREST (separate from closing costs) ===
2025-06-15 * "Title Company" "Prepaid mortgage interest"
  Expenses:Housing:123MainSt:MortgageInterest         850.00 USD
  Assets:Bank:Checking                               -850.00 USD
    days: 15
    note: "Interest from closing to month-end"

; === INITIAL ESCROW ===
2025-06-15 * "Title Company" "Initial escrow deposit"
  Assets:Escrow:NewLender:123MainSt                 2,400.00 USD
  Assets:Bank:Checking                             -2,400.00 USD
    property-tax-reserve: 1200.00
    insurance-reserve: 1200.00

; === WRITE OFF OLD LOAN COSTS (different lender) ===
2025-06-15 * "Amortization" "Deduct remaining old loan costs - different lender"
  Expenses:Housing:123MainSt:AmortizedCosts        4,133.33 USD
  Assets:Property:123MainSt:Refi2020:AccumAmort   -4,133.33 USD
    cite: "IRS Pub 936 - Refinance with different lender"

; === CLOSE OLD ACCOUNTS ===
2025-06-16 balance Liabilities:Mortgage:123MainSt:Original  0 USD
2025-06-16 close Liabilities:Mortgage:123MainSt:Original
2025-06-16 close Assets:Property:123MainSt:Refi2020:Costs
2025-06-16 close Assets:Property:123MainSt:Refi2020:AccumAmort

Annual Amortization Template

; === 2025 AMORTIZATION (partial year) ===
2025-12-31 * "Amortization" "2025 refinance cost amortization"
  Expenses:Housing:123MainSt:AmortizedCosts         158.01 USD
  Assets:Property:123MainSt:Refi2025:AccumAmort    -158.01 USD
    original-costs: 8750.00
    period: "Jun 15 - Dec 31 (6.5 months)"
    monthly-rate: 24.31
    remaining: 8591.99

; === 2026 AMORTIZATION (full year) ===
2026-12-31 * "Amortization" "2026 refinance cost amortization"
  Expenses:Housing:123MainSt:AmortizedCosts         291.67 USD
  Assets:Property:123MainSt:Refi2025:AccumAmort    -291.67 USD
    period: "Full year (12 months)"
    remaining: 8300.32

Tax Time Queries

Query 1: Total Amortization Deduction by Year

SELECT
  year,
  SUM(position) as total_amortization
WHERE
  account ~ "AmortizedCosts"
  AND account ~ "123MainSt"
GROUP BY year
ORDER BY year

Query 2: Amortization Status Report

SELECT
  ROOT(account, 4) as property,
  SUM(CASE WHEN account ~ "Refi.*:Costs" THEN position ELSE 0 END) as original,
  SUM(CASE WHEN account ~ "AccumAmort" THEN -position ELSE 0 END) as amortized,
  SUM(CASE WHEN account ~ "Refi.*:Costs" THEN position ELSE 0 END) +
  SUM(CASE WHEN account ~ "AccumAmort" THEN position ELSE 0 END) as remaining
WHERE
  account ~ "Refi"
GROUP BY property

Query 3: Combined Interest + Amortization (Schedule A Total)

SELECT
  year,
  SUM(CASE WHEN account ~ "MortgageInterest" THEN position ELSE 0 END) as interest,
  SUM(CASE WHEN account ~ "AmortizedCosts" THEN position ELSE 0 END) as amortization,
  SUM(position) as total_deduction
WHERE
  (account ~ "MortgageInterest" OR account ~ "AmortizedCosts")
  AND account ~ "123MainSt"
  AND year = 2025
GROUP BY year

Query 4: Break-Even Tracker

SELECT
  date,
  CUMSUM(position) as cumulative_savings
WHERE
  account = "Income:Interest:RefiSavings:123MainSt"
  AND year >= 2025
ORDER BY date

Key Takeaways

Scenario	Treatment	Where to Deduct
Refinance points	Amortize over loan life	Schedule A (or E for rental)
Refinance with different lender	Deduct old costs immediately	Same year
Refinance with same lender	Add old costs to new amortization	Over new loan term
Sell property	Deduct all remaining costs	Year of sale
Home improvement portion of points	Deduct immediately	Year paid
Prepaid interest at closing	Deduct as mortgage interest	Year paid

My Break-Even Calculator

2025-06-15 custom "refinance-breakeven" "123MainSt"
  ; Monthly savings calculation
  old-monthly-payment: 2022.00
  new-monthly-payment: 2042.00  ; Higher (bigger loan)
  payment-difference: -20.00     ; Paying more

  ; But interest is lower
  old-monthly-interest: 1733.33
  new-monthly-interest: 1677.08
  interest-savings: 56.25

  ; Net monthly benefit
  net-monthly-benefit: 56.25    ; Interest savings

  ; Break-even
  total-closing-costs: 8750.00
  months-to-breakeven: 156      ; 8750 / 56.25 = 13 years

  ; Was it worth it?
  ; Yes, if:
  ; - Plan to stay 13+ years, OR
  ; - Cash-out proceeds earn more than loan rate, OR
  ; - Old loan had remaining costs to write off

Hope this template helps! The key insight I’ve had is to treat refinance costs as an asset that gets slowly consumed over time - that mental model makes the entries intuitive.