Deduct your private mortgage insurance in 2007 in Denver

Happy New Year!

2007 brings great news for borrowers who might qualify for a loan that carries private mortgage insurance.

Congress passed and the President signed into law at the end of 2006, the Tax Relief and Healthcare Act of 2006. (H.R. 6111) The act allows PMI to be tax deductable for qualified homeowners. We have in the past, encouraged borrowers to do piggy-back loans, 80/20’s, lender paid mortgage insurance 1 loans, and 80/10/10’s.  

Lets’ review the details of this "too good to be true" Act.

First, the deduction only applies to NEW loans originated after Jan. 1, 2007 AND

Second, the deduction only applies for the calender year of 2007 and will exprire Dec. 31, 2007.

The reason? Congress wants to see how much the deduction will actually cost them in tax receipts before they extend it into 2008.

Bottom line, the deduction will be good for tax payers who itemize - just like the benefit of the mortgage interest deduction. Keep in mind the deduction still follows IRS rules based on income limits. If your AGI is over $110,000 - you get NO deduction. If you pre-pay the MIP premium at closing, it is not tax deductable until the following year. Which would be 2008 and the risk is that the feds may or may not extend the deduction past 2007.

Politicians are  complaining that  lenders are loaning too much towards the purchase prices of the homes - yet when they have the opportunity to do something to help, they place such strict limits it may not help at all.

So, before you sign up for a loan with PMI in order to deduct the premium, consider the other options that have been the mainstay for years… 80/20’s, 80/10/10’s and lender paid mortgage insurance loans.

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