RISMEDIA, Feb. 6, 2007-For those planning to purchase a home this year, Weichert Financial Services has good news. Beginning with mortgage loans originated on January 1, 2007, private mortgage insurance is now deductible on federal income tax returns. Private mortgage insurance, or PMI as it is commonly known, generally is required by lenders whenever the down payment is less than 20%.
According to Fred Watkins, president of Weichert Financial Services, the new tax break will make the dream of homeownership more attainable.
He said, "We believe this new tax deductibility makes loans with private mortgage insurance more affordable. In some cases, it will enable buyers to qualify for a larger loan."
As he explained, those buying with little or no money down typically weigh the financial pros and cons of a single loan carrying a PMI premium versus a piggyback or combo loan. The latter consists of a first mortgage plus a second mortgage at a higher interest rate. Now that PMI is federally tax deductible for qualified buyers, the single loan with PMI is now as affordable or, in some cases, even lower in overall cost versus most combo loans. And unlike the fluctuating interest rates typical of second mortgage loans, premiums are fixed so that buyers can enjoy the convenience and peace-of-mind of one stable monthly PMI payment.
In addition, while second mortgages must be paid in full, typically homeowners may request the cancellation of PMI coverage once their home appreciates to the point that their new combined loan-to-value ratio is 78%.
According to the bill passed by Congress late in 2006, PMI premiums are fully deductible for buyers with adjusted gross incomes of $100,000 or less. Deductions are phased out at 10-percent increments for those with adjusted gross incomes between $100,001 and $110,000. The cost of private mortgage insurance generally averages one-half of one percent of the loan amount.
For more information, call -800-USA-SOLD or visit www.weichert.com.