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FYI 2007 (have you heard Charles?)


melisadawn
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Not sure how true this is. Maybe Charles has heard something. I got this email from a mortgage company we talked to before buying our house.

Great News Out of Washington for Homebuyers

If lawmakers get their way, Private Mortgage Insurance (PMI) will become tax-deductible for home loans originated after January 1, 2007. PMI is a requirement for most home loans in which borrowers make a down payment of less than 20%.

The bill has already been passed by Congress and awaits the President's signature before it becomes law.

While the new deduction is restricted to homebuyers whose annual household income does not exceed $100,000, the legislation could impact nearly 50% of all homebuyers, according to a SMR Research study of homes financed in 2005.

Up until now, many homebuyers have used "piggyback" loans in order to avoid paying PMI. A piggyback loan is where the homebuyer obtains two mortgages, a first mortgage for 80% of the purchase price, and a second mortgage for the remaining funds required, outside of the down payment.

Since many homebuyers have chosen a Home Equity Line of Credit (HELOC) as their second mortgage, their required monthly payments have increased significantly as a result of the actions of the Federal Reserve. Today, many homebuyers with a HELOC are now paying more than they would have if they had chosen PMI with their original mortgage.

What does this legislation mean to you?

Under the law, homebuyers will have more financing options available that offer greater tax deductibility and lower monthly payments. This means a homebuyer could potentially afford a more expensive home! In addition, homebuyers could qualify for traditional mortgages rather than the more expensive options they were forced to pursue in the past.

Contact me immediately to determine how you can put this information to use, and get off to a great start in 2007!

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Guest BadAccountant

I just went and searched it out (because the link provided did not list it as a provision) and found that the deduction covers VA/FHA as well!!!! Sweet 8lb 6oz Baby Jesus, I just might be itemizing this year!! ::USA::

Premiums for Mortgage Insurance

[Act §419; Code §§163, 6050H]

The Act provides that premiums paid or accrued for qualified mortgage insurance by a taxpayer during the taxable year in connection with acquisition indebtedness with respect to a qualified residence of the taxpayer is treated as interest which is qualified residence interest.

In addition, the Act defines qualified mortgage insurance as mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined by §2 of the Homeowners Protection Act of 1998, 12 U.S.C. §4901, as in effect on the date of the enactment).

There's more, here's the link:

http://www.bnatax.com/tm/6111_summary_prod.htm

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Sorry, but it has to be a mortgage that was taken out or refinanced in 2007.
And there are pretty severe income limitations set by this federal tax expenditure. For a single filer, the MI deduction begins to phase out at an AGI of 50k and is not available at all over 55k. Double that for married folks.
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What does this legislation mean to you?

Under the law, homebuyers will have more financing options available that offer greater tax deductibility and lower monthly payments. This means a homebuyer could potentially afford a more expensive home!

So, the $100ish we pay each month in MPI would now save us about $30 a month in taxes we would have paid. The extra $30 a month would help me afford a better home? Oh goodie. Now my house will come with light bulbs already installed! :)

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The idea is to give incentive for buyers with little or no equity (small down payments) to use fixed loans & MI rather than piggyback loans. The piggyback loan was being pushed due to the tax write-off rather than the non-deductible MI. If home prices drop, increased use of mortgage insurance could help stabilize the markets by spreading some of the risk of loss to the insurers rather than the entire loss being swallowed by the banks & derivatives markets (which has the potential to unravel if uninsured mortgagees go underwater, defaults rise, and mortgagors are left holding the bag).

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