Check out the recent article from Bankrate.com dealing with the new legislation that makes mortgage insurance fully deductible in 2007
If you are planning to buy property with less than 20% down, new legislation can save you money. Lenders often require purchasers to take out a mortgage insurance policy for loans larger than 80% of the sales price. Check out the recent article from Bankrate.com dealing with the new legislation that makes mortgage insurance fully deductible in 2007. Click here to read article. The article explains the new legislation, mortgage insurance, piggy-back loans, and important caveats to the new legislation.
To summarize the article:
New Legislation
The 109th Congress passed legislation making mortgage insurance tax deductible for the 2007 year. The bill has to be renewed to be in effect forthe 2008 year.
Mortgage Insurance and Piggyback loans
When you take out a loan for more than 80% of the sales price, lenders consider this to be a higher risk loan. You can resolve this by taking out a mortgage insurance policy for your loan or you can add on a piggy back loan to keep all trusts under 80% of the sales price.
Important Caveats to Legislation
- The tax deduction only applies to loans closed in 2007
- There are income limits (full deduction with adjusted groos income below $100,000)
- The legislation would have to be renewed in order to be in effect for 2008
- The law will probably not affect you if you take the standard deduction instead of the itemized deduction
Bottom Line
The monthly payments with private mortgage insurance will be higher than with a piggy back loan; however, mortgage insurance can be cancelled after two years if the property value has increased, making the remaining balance of the loan less than 80% of the value of the home.
*Please consult your tax advisor and lender to see what option best suits you. All information is deemed reliable but not guaranteed.
