Homeowners who pay less than 20 percent down must many times pay for private mortgage insurance (PMI), but a law recently passed by Congress makes that cost fully deductible on income taxes starting in 2007. It applies to new loans for households making less than $100,000 per year.
The change also applies to mortgage insurance issued in combination with a Federal Housing Administration (FHA) loan.
Private mortgage insurance is often required of borrowers who don’t have down payments of at least 20 percent, and don’t take out a second “piggyback” loan. Government insurance is mostly offered through the to borrowers considered too risky for traditional loans programs, usually first-time home buyers. Military veterans also take it out.
“Making the cost of mortgage insurance tax deductible helps those who need it most: low- and moderate-income Americans, primarily first-time home buyers, who are financially responsible but simply don’t have the means to amass a 20 percent down payment,” says Steve Smith, Chief Executive Officer of The PMI Group Inc.
A broad range of consumer, business, taxpayer, civil rights, civic and labor groups have supported the legislation.
© 2006 FLORIDA ASSOCIATION OF REALTORS®
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