Question: I have a high-interest-rate loan and...

Question: I have a high-interest-rate loan and wish to refinance my property. The lender tells me that there is a penalty for early prepayment and a refinance charge to obtain a lower interest rate. Is that tax deductible?

Answer: You should contact your accountant. However, I understand that any payment you make for prepayment of your mortgage and any refinance charges are considered interest and tax deductible.

Q: Home sales and resales for the first quarter of this year have not increased dramatically, even though interest rates have dropped a great deal. Are there any reasons for this?

A: I think that there are probably three reasons.

In all probability, weather was a major factor. Here in Southern California, we had a great deal of rain, while other parts of the country also had inclement weather.

The second reason is that home sales in areas such as Texas, Oklahoma and Arkansas have suffered dramatically as a result of the problems of the oil industry. Also, I feel that many persons have been holding off buying, believing that interest rates will continue to decline.

I feel that there will be a tremendous sales increase, particularly here in California, during the remainder of this year as a result of lower interest rates, and the pent-up demand.

Fontaine is president of the Western Regional Master Builders Assn. and a director of the American Building Contractors Assn. He will answer questions concerning home improvements. Phone 213/653-4084 or write him at 6404 Wilshire Blvd., Suite 850, Los Angeles 90048-5510.