Mortgage Insurance Becomes Tax Deductable

Mortgage insurance will be tax deductable for some home owners in 2007. The tax deduction will apply to home owners purchasing a home in 2007 and will see the benefits when they file their taxes in 2008. In order to receive the full deduction, the adjusted gross income must be $100,000 or less.

In the past, homeowners were able to avoid paying mortgage insurance by structuring a loan as an 80% first mortgage and using a piggy back second for the remaining amount of the loan. The amount of mortgage insurance a borrower pays will depend on the amount of the down payment. The factor that is used to calculate mortgage insurance increases for every 5% you finance above 80% of the purchase price. Borrowers should compare the difference between paying mortgage insurance and piggy back loans. Even if a payment is slightly more with mortgage insurance the homeowner may benefit by choosing to pay the mortgage insurance with one loan.

A homeowner needs to consider how soon they will be able to show the lender that they have 20% equity in the home. In most cases, the lender will remove the mortgage insurance once the homeowner has paid mortgage insurance for two years and can show they have 20% equity in the home. With a piggy back second the homeowner has the loan until the balance is paid off or refinances.

Many factors go into determing the rate you qualify at and the amount of mortgage insurance you will need to pay. Contact Loan Officer to determine what is the best option for you. To find out more about the new tax deduction and determine if you can qualify, contact a certified public accountant.

Related Articles
Understanding Mortgage Insurance