Loan Refi for principal residence

[HarleyBabe]

Does a refinance for a principal residence qualify for more than 5 year amortization?

[masteff]

IRS Reg 1.72(p)-1 Q&A-8

"Q–8: Can a refinancing qualify as a principal residence plan loan?

A–8: (a) Refinancings. In general, no, a refinancing cannot qualify as a principal residence plan loan. However, a loan from a qualified employer plan used to repay a loan from a third party will qualify as a principal residence plan loan if the plan loan qualifies as a principal residence plan loan without regard to the loan from the third party.

(b) Example. The following example illustrates the rules in paragraph (a) of this Q&A–8 and is based upon the assumptions described in the introductory text of this section:

Example. (i) On July 1, 2003, a participant requests a $50,000 plan loan to be repaid in level monthly installments over 15 years. On August 1, 2003, the participant acquires a principal residence and pays a portion of the purchase price with a $50,000 bank loan. On September 1, 2003, the plan loans $50,000 to the participant, which the participant uses to pay the bank loan.

(ii) Because the plan loan satisfies the requirements to qualify as a principal residence plan loan (taking into account the tracing rules of section 163(h)(3)(B)), the plan loan qualifies for the exception in section 72(p)(2)(B)(ii)."

[HarleyBabe]

so yes, I think?

[masteff]

Don't get caught up in the example and miss the first sentence: "In general, no, a refinancing cannot qualify as a principal residence plan loan."

More details are needed, especially when was the purchase of the house. The Code uses the phrase "used to acquire". There is a grey line that you cross over where a new plan loan is too far away from the purchase date to be considered an acquisition.