Mortgage insurance will be deductible in 2007David Lunadefault and foreclosure, home purchase loans or refinances, full tax write-off
The 109th Congress finally assisted homeowners with a long-time
thorny issue - mortgage insurance (MI).
Traditionally, homeowners with less than a 20 percent commitment
in their homes were required to have MI in order to protect the
lender in case of default and foreclosure. MI was paid for by the
borrower and was not tax deductible.
However, prior to 2007, President Bush signed a bill allowing MI
paid during 2007 to be deducted from taxable income. It applies to
any home purchase loans or refinances made in 2007 and is not
retroactive.
Individuals with annual incomes of $100,000 or less are eligible
for a full tax write-off of their MI premiums (please consult your
tax advisor to confirm your borrowers specific eligibility). If the
MI premium is more than $600, the lender should automatically
provide a form that can be used for the MI deduction.
This deduction applies to all of the following:
-Mortgage insurance premiums;
-Private mortgage insurance;
-The U.S. Department of
Agriculture Rural Housing Service; and
-The U.S. Department of Veterans
Affairs funding fee.
Industry comments have been very positive:
"Making the cost of mortgage insurance tax deductible helps
those who need it most: low- and moderate-income Americans -
primarily first-time homebuyers - who are financially responsible
but simply don't have the means to amass a 20-percent down payment.
We congratulate Congress for taking this important step to address
a key barrier to homeownership that so many Americans
face."
Steve Smith
CEO, The PMI Group Inc.
President, Mortgage Insurance Companies of America
"Mortgage insurance has long provided a safe and smart way
for families to afford a home. With this new deduction, it becomes
all the more sensible at a time when both interest rates and
housing costs are on the rise."
Patrick Sinks, President
MGIC
David Luna is past chair of the Utah Residential Mortgage
Regulatory Commission and past president of the Utah Association of Mortgage
Brokers. He may be reached at (801) 756-8226 or online at www.utahmortgageeducation.com.
