- A promissory or mortgage note that bears a minimum interest rate equal or greater than AFR (the long-term rate is now 2.67%) and spells out its term and payment dates, meaning it must be decided whether payments are to be monthly, quarterly or annually.
- A mortgage or deed of trust properly recorded with correct governmental authority, which makes the mortgage secured and gives the lender the legal right to foreclose.
- The lender records mortgage interest as income on Schedule B of their return.
- The borrower can deduct mortgage interest expense as an itemized deduction.
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