By Monika McGillicuddy

The New Hampshire real estate market is definitely what I would call a buyers market. No doubt about it! So while it's pretty cold up here IT IS a GREAT time to be a BUYER  in New Hampshire.  Not only is there a good selection of homes available but prices have dropped and in some case more than 10% compared to a year ago. All this makes buying your first home or investing in real estate a great opportunity. 

If you're a buyer and you've been saving for that dream home...not sure if you're there yet and confused about Private Mortgage Insurance or if you are a REALTOR and have a hard time really explaining Private Mortgage Insurance to your buyers or better yet why they have to have it.

Read on because I know I have struggled with it...so I asked one of my favorite Mortgage Consultants to blog about PMI and the little gift Congress recently gave many folks this season. It might make a difference to someone on the fence about buying...sometimes there is no better time than the present..to give yourself the gift of home ownership...of course if you need a good REALTOR call me.

So here is Dave Antczak's take on it....

PMI……private mortgage insurance.  It’s designed to protect the lender against losses should the borrower default on the loan, especially in the first few years.  

Until recently, mortgage consultants and borrowers would jump through hoops in an effort to avoid it when the borrower didn’t have 20% to put down on a house. 

The typical ways to minimize the cost of PMI were to either use tax advantage mortgage insurance, (also known as TAMI), where the lender would build the cost of the insurance into the rate or roll it into the loan as a lump sum; or they would use a “piggy-back” loan, in which the borrower would have an 80% first mortgage, (thus avoiding the PMI requirement), and then a second mortgage to cover the difference between the down payment and the remaining 20%.  Though the second loan has a higher rate, a “piggy-back” is often less expensive than PMI. 

These options don’t always work for every borrower, however.  Kevin Schneider, president of the PMI firm, Genworth Mortgage Insurance, estimates that in the coming year, 1 million buyers will sign up for mortgages with PMI.

But due to an early Christmas present from Congress, many more folks will now be able to save a little on PMI. 

Early on Sunday morning, lawmakers made it possible for many homeowners to receive a tax deduction for their PMI.  Homeowners with less than $100,000 in taxable income are eligible, and will average a tax savings of around $300, according to experts.

“It enables folks of low to moderate income, the traditional first-time home-buyers, to get into a low down-payment mortgage,” said Schneider.

But here’s the best part.  By taking advantage of the seldom utilized TAMI tactic referenced earlier, in which the PMI cost is rolled into the mortgage, borrowers can save even more.  It’s always been the best way to go according to many, including TV financial advisor Suze Orman, because it increases the interest deduction and adds less to the monthly payment.  And now with the new tax rule, the entire up-front premium becomes tax deductible the first year. 

On a $200,000 mortgage, that translates into a Christmas gift from Congress of over $1,000……not bad.  Happy Holidays!

David Antczak

Home Loan Consultant

617-510-1112 - mobile

david_antczak@cmvhomeloans.com