New Law Makes Mortgage Insurance Tax Deductible

Private mortgage insurance has always been an easy and predictable way for informed buyers to finance the purchase of their home. Now, it’s also tax deductible, making it an even better choice in many cases.

Mortgage insurance allows borrowers with a less than 20 percent down payment to purchase a home by providing lender coverage against borrower default.

Savings for Families

For many first-time homebuyers, the biggest hurdle is saving up for the down payment. In today’s high-priced real estate markets, 20 percent can amount to a significant chunk of change. But don’t give up. With private mortgage insurance, even if you’ve got a down payment of just 3 percent or less, you can still buy a home.

This new tax break passed by Congress gives you one more reason to consider purchasing or refinancing your home with private mortgage insurance. Steve Smith, chief executive officer of The PMI Group, Inc. and president of the Mortgage Insurance Companies of America, explains: “Making the cost of mortgage insurance tax deductible helps those who need it most-low-to-moderate-income Americans, primarily first-time homebuyers, who are simply unable to save enough for a 20 percent down payment. This deduction will save homebuyers with insured loans hundreds of dollars.”

If you or your family earns $100,000 or less and purchases a home during 2007 with private mortgage insurance, Mortgage Insurance Companies of America, an industry trade group, estimates that this new law may save you $200 to $400 annually. Consult with your own tax advisor concerning the applicability of this new deduction in your particular circumstances under the Internal Revenue Code and the laws of any other taxing jurisdiction.

Families earning up to $109,000 can take advantage of a partial deduction. Your home will probably be the largest investment of your lifetime and every extra bit of money helps.

Good Reasons to Choose

Private Mortgage Insurance

By making private mortgage insurance tax deductible, the new federal law allows more people to become homeowners. “There are lots of loan choices,” explained John Taylor, president and chief executive officer of the National Community Reinvestment Coalition. “Mortgage insurance is straightforward. It is a reliable and prudent way for you to get the loan best suited to your needs. And you can cancel it as soon as your equity builds to 20 percent.”

What’s Right for You?

Over the years, many homebuyers have chosen private mortgage insurance because it’s simple, safe and smart. Now it’s also tax deductible. As you’re considering your home-financing alternatives, consider private mortgage insurance. It may be a product that’s right for you.

By: Stacey Moore

Article Directory: http://www.articledashboard.com

Popularity: 57% [?]

Technorati Tags: keywords

Old Trends Returning-private Mortgage Insurance Back In Vogue

Through the turn of the millennium mortgage brokers have been advocating using a first trust deed and a second trust deed, combination to eliminate private mortgage insurance which is also known as PMI. PMI protects the bank from any deficiency at time of a foreclosure. The borrower receives no benefit or protection from having PMI. The consumer using the first and second trust deed combination in most situations would have lower payments and slightly greater tax benefits, until recently there was no tax benefit in having PMI on the mortgage.

A new product has now emerged to allow for 100% financed stated income loans to exist after many major banks have pulled their 80/20 100% financed stated income loans from the market. This pullback was a direct result of banks not being able to sell their 20% loans on the secondary market on Wall Street, because this group of high-risk loans started to falter in regards to their performance. To fill this void a new single loan up to 100% with PMI built into the pricing has arrived. This product allows the buyer to state their income versus providing paystub and W-2 forms. Banks now are looking for the insurance protection that PMI offers them in case of a foreclosure. This new trend will allow buyers to attain the needed financing that high cost areas require and allow the banks to be protected at the same time.

Another school of thought promoted more of a long term strategy. By opting for PMI, lower payments could possibly be achieved once two years of home ownership had passed and a 20% equity position was reached. At this point with an appraisal the bank would have to remove the PMI. The net result was then lower payments and one loan with a lower rate than the second loan would have had. The federal government just added an additional benefit for the use of PMI. If your household adjusted gross income is under $100,000 the PMI may now be deducted as an expense. As with any tax situation we always advise you to seek the expertise of an accountant or other tax professional. With the meltdown of the sub-prime market which used a first and second trust deed, combination as their main loan structure, traditional single loan programs with PMI are now very much in demand.

By: James Dedolph

Article Directory: http://www.articledashboard.com

Co-written by James Dedolph and Randy Nathan, creators of HomeSniffer.com where you can find Homes for Sale in San Diego and LoanSniffer.net where you can find the best rate and terms for Homes Loans in San Diego . Both of these sites are a good resource for information about San Diego Real Estate .

Popularity: 55% [?]

Technorati Tags: keywords

Getting Around Private Mortgage Insurance Problems

If you apply for a loan, 20 percent is the magical number you must focus on. If you put the amount or more down on a loan, you do not have to pay private mortgage insurance.

Private mortgage insurance is the ultimate catch-22 when it comes to getting financing for a home purchase. Essentially, it is a tool used by mortgage lenders to protect themselves in case you default on the loan. The tool works by insuring the difference between your down payment and the 20 percent threshold.

The reason private mortgage insurance is a catch-22 is it is taken into account when calculating whether you can afford the loan. Even though it is a requirement by the lender, it may actually result in your failing to qualifying for a loan. Ah, welcome to the world of mortgage loans and high finance.

There are multiple ways to get around private mortgage insurance. Obviously, you could save up the 20 percent required, but that can be a large number given the astronomical cost of buying a home today. On a $500,000 home, we are talking about a down payment of $100,000. In short, it is not chump change. Ah, but there is a trick you are going to be happy to learn about.

In the finance industry, there is something known as the 80-10-10 loan and what a beauty it is. The 80 represents the 80 percent of the cost of the home that the lender will underwrite as the first mortgage. The first 10 in the equation equals the ten percent you will pay as a down payment for that home of your dreams. The second 10 represents a second mortgage equating to 10 percent of the purchase price. Who gives you this second? Often the same lender! This creative concept is why people both love and hate the finance industry.

So, who exactly is going to step up to the plate and help you with this type of loan? Well, the lender that underwrites the first mortgage is almost always going to be the party in question. As lenders go, savings and loans seem to be more comfortable with this approach than your average lender. That being said, practically any lender will do it if the circumstances meet their guidelines. They will, however, often require the second mortgage have a shorter term. The exact term depends on the lender, but a five to 15 year term is normal.

By: Dan Lewis

Article Directory: http://www.articledashboard.com

Dan Lewis is with Great Western Mortgage - providing San Diego debt consolidation loans.

Popularity: 57% [?]

Technorati Tags: keywords

Many a first-time homebuyer has grumbled about paying private mortgage insurance. This article discusses the particulars of private mortgage insurance, also known as “PMI.”

Private Mortgage Insurance

Unless the owners are insane, every business in the United States carries some form of insurance to protect against losses. The various lending institutions that issue home loans, equity lines and refinances to borrowers are no different. The insurance they carry is private mortgage insurance.

Private mortgage insurance protects a lending institution from losses if you default on your loan and a home goes into foreclosure. Essentially, the lending institution is going to be covered for any shortages between the cost of liquidating the home and the amount of the loan. This is of particular importance to a lender when the housing market pulls back from high valuations. In such a pull back, it is not uncommon to see the total mortgage balance exceed the value of the home. Obviously, this makes lenders uncomfortable.

PMI - Premiums

Most homeowners can wrap their minds around the need for private mortgage insurance. The grumbling starts, however, when they find out who has to pay for the insurance. Yep, the homeowner is on the hook. As the homeowner, you are paying for insurance that will protect the lender if you default. While this may not seem fair, keep in mind the lender is giving you a rather sizable chunk of money. If you are still grumbling, there is a way to avoid paying mortgage insurance.

20 Percent Down

If you take out a home loan, the 20 percent figure will come front and center in your mind. Why? 20 percent is a magic figure in the world of home loans and mortgages. If you make a down payment of 20 percent, you are not required to obtain or pay for private mortgage insurance. With PMI premiums running $1,000 or more a year, it makes sense to pay 20 percent as a down payment if at all possible.

What if you can’t scrape together 20 percent of the home value for the down payment? Well, you’re stuck paying PMI, but not forever. Once your equity in the home reaches 20 percent of the valuation, you can cancel the PMI. Keep a close on your equity as lending institutions are under no duty to tell you when the magic 20 percent figure is reached. Oddly, they almost never seem to remember!

PMI

Private mortgage insurance is expensive, but you can avoid it with a sizeable deposit. If you can’t come up with that chunk of change, try to keep in mind the beautiful home and investment the loan let you acquire.

relevant post(s)

Private Mortgage Insurance

Popularity: 57% [?]

Technorati Tags: Borrowers, equity lines, first time homebuyer, Foreclosure, home loan, housing market, lending institution, lending institutions, mortgage balance, pmi premiums, Private Mortgage Insurance, refinances