Private Mortgage Insurance
Private Mortgage Insurance is Tax Deductible in 2007
Recent legislation makes mortgage insurance tax deductible for the 2007 tax year. The legislation affects borrowers who close a loan on or after January 1, 2007 and pay a mortgage insurance premium.
The new legislation allows borrowers with up to $100,000 adjusted gross income (AGI) a year to deduct the entire cost of their MI payment, boosting home ownership and reducing the cost of mortgage insurance.
For additional information from Mortgage Insurance Companies of America (MICA), and Frequently Asked Questions, go to www.privatemi.com/loanoptions/benefits/deductible.cfm
What is Mortgage Insurance?
Mortgage insurance (MI) protects a lender from excess risk when a home loan is over 80% of the purchase price. It's temporary -- in most cases, you can cancel it when your equity reaches 20%. With the protection of mortgage insurance, lenders are willing to offer loans with very low down payments -- even with no money down in some cases.
Jump-Start Homeownership
Using mortgage insurance enable you to buy a home and start building equity years sooner than if you waited to save 20%. It gets you in a home before prices rise any further -- and lets that increase in value work for you, rather than against you. Rising values after you purchase can even help you cancel your mortgage insurance sooner!
How Does Mortgage Insurance Work?
Premiums are based on the percentage of your home's value that you borrow. Payments can be covered up up front or paid on a monthly basis. In either case, there is only one check to write, and the cost will not increase over time.
Types of Mortgage Insurance
There are several types of mortgage insurance available. Which product is best depends on your individual situation. Ask your lender how these plans might work for you:
Monthly or Zero Monthly
This payment option uses a coverage term of one month. Premiums are paid monthly as part of your mortgage payment. When you are able to cancel your MI, your mortgage payment will decrease by the amount of the premium.
Single Premium
This payment option consists of a single premium, usually financed into your mortgage. Because the mortgage is amortized over a long period of time, this usually results in a lower monthly payment. If you cancel your MI before the coverage period ends, you may receive a cash refund.
Lender-Paid or "No MI"
Some lenders advertise low down payment loans with "no MI." Usually, these loans do carry MI -- it's simply paid by the lender. The lender covers the mortgage insurance premium through an increase in the interest rate on the loan. These policies usually carry no refund potential, and cannot be cancelled by the borrower.