New Law Could Save Homebuyers Money
Private Mortgage Insurance on Purchases Tax Deductible
By Pete Shrader, Mortgage Banker, Realtor
MoneyLink Mortgage, MarketLink Realty
Twin Cities, Minnesota
President Bush signed new legislation earlier this year effectively creating a tax deduction for home buyers that put less than 20% down. The bill, H.R. 6111, passed the House 367-45 and the Senate 79-9. The law makes premiums paid for Private Mortgage Insurance (PMI) tax deductible. PMI is an insurance policy that protects mortgage lenders in case of default and offers no benefit to you the borrower.
What does this mean to you?
If you are a homebuyer with less than 20% down you now have more financing options available. These new options offer more tax deductibility that will save you money at tax time. Studies show this law could affect nearly 50% of all homebuyers planning to buy in 2007.
Questions you may have about this new law:
What is the income limit to qualify for new tax deduction?
Does this law apply to loans closed prior to Jan 1st, 2007?
Wasn’t there already a way to avoid paying PMI premiums altogether?
Does this law affect me if I refinance in 2007?
Did you know?
PMI is sometimes confused with Home Owner’s Insurance. A home owner’s policy covers the structure and its contents in case of theft or property damage.
PMI is also occasionally confused with Mortgage Life Insurance. Generally speaking, mortgage life insurance policies pay off the remaining balance of a mortgage loan in the instance of a borrower’s death. Usually a Term Life Insurance policy could be used to serve the same purpose at a much lower cost. Check with an insurance agent that provides these types of policies for advice.
For more information or help deciding what to do based on your unique situation email me or call my direct line at (952) 292-0285.
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Pete Shrader is a Mortgage Banker, a Realtor, a Real Estate Investor and the author of the Smart Seller Guide. This article is not meant to offer legal advice and is not an offer to lend or to lock a rate. Always consult the appropriate professional for tax or legal advice. © Pete Shrader 2007