What you ought to know (#9)

I heard the Mortgage Insurance is now tax deductible, is that true?

When you buy a house, lenders consider you a riskier borrower if you make a down payment of less than 20 percent. There are two main ways to make you pay for that risk: mortgage insurance (an insurance policy where the lender is the beneficiary, in case of default) or a piggyback loan (80-10-10 for example, where the borrower gets an 80% first, a 10% second, and puts down 10%).

The 109th Congress passed a tax law (making mortgage insurance tax-deductible in 2007) in its final hours, last year.

There are some rules to determine whether or not you can take the tax deduction:

1. The tax deduction applies only to mortgages that are closed in 2007. If you have a loan with mortgage insurance in 2006, you won't be able to deduct the premiums in the 2007 tax year unless you refinance in 2007.
2. There are income limits. You get the full deduction if your adjusted gross income is $100,000 or less. The amount you can deduct phases out rapidly after that, and no mortgage insurance deduction is available if you make more than $110,000.
3. This is a one-year deal, and Congress would have to renew the deduction to make it apply for the 2008 tax year and beyond.

Bottom-line...the borrower should check with their tax advisor to determine whether or not they are eligible for the deduction, and secondly, you should have them talk with us, at Arrowhead Home Loans to see if a piggyback loan makes more sense than mortgage insurance.

***If you have a question you´d like answered, please let me know.***