A CHANGE IN PRIVATE MORTGAGE INSURANCE

Big news from Congress -- as you may already know, Private Mortgage Insurance (PMI) is required any time a loan is taken out with a "loan to value" ratio of 80% or higher (less than 20% down payment).  Historically, these PMI premiums have never been tax deductible. But Congress has recently passed a law with a change to the tax code which will allow PMI premiums to be claimed as tax deductions for households earning less than $100,000 annually.

What does this mean for home buyers?

Primarily, it means that mortgage options which include standard Private Mortgage Insurance will now become much more competitive and attractive, especially as PMI can often be removed with sufficient property appreciation or declining loan balance, assuming payments are timely made.

Since clients traditionally have turned to "piggyback" second mortgages as a way to avoid mortgage insurance, this news is particularly welcome, as second mortgage rates have risen dramatically in recent years.

This piece of legislation still requires President Bush's signature, but at this time there is no indication that he will not sign it. Also, the current legislation applies to new loans closed in 2007 only, and as such, will require another act of Congress to be extended to 2008 and beyond.

Consult your tax professional to confirm the benefits which this change may have for you.

Source: Republic State Mortgage/Skye