RISMEDIA, April 12, 2007-Just in time for this spring's home buying season, a new federal tax deduction allows many qualified families to write-off premiums paid for private and government mortgage insurance on home loans that close in 2007.
This is the first time that homeowners with low down payment loans will be able to deduct the cost of their mortgage insurance premiums, resulting in a $300 to $350 annual tax saving for qualified families.
Under the new law, passed by Congress and signed by President Bush late last year, private mortgage insurance (PrivateMI) premiums are fully tax deductible for borrowers who buy or refinance a home this year if their adjusted gross income is $100,000 or less. Families with incomes of more than $100,000 and up to $109,000 will be eligible for a reduced deduction.
The new deduction could bring a bigger refund when taxes are filed in April 2008, giving more money to qualified borrowers who buy or refinance homes this year with tax-deductible private mortgage insurance.
A number of leading Hispanic groups strongly supported passage by Congress of the mortgage insurance tax deduction, and are now working to ensure that Congress extends the tax deduction in future years. In the meantime, these groups want to make sure that people are aware of this new tax deduction when they are reviewing their home financing options.
"Like many Americans, Latinos rely on homeownership to build wealth and are entering the housing market to get a piece of their American Dream," said Brent Wilkes, executive director from the League of United Latin American Citizens (LULAC). "This is a well-deserved tax deduction designed to help those who need it most — families who are buying a home without a big down payment."
"Tax deductible private mortgage insurance helps many working class Hispanic families clear the final hurdle to achieving the American dream of homeownership," said Rev. Luis Cortes, president of Esperanza USA. "By making mortgage insurance tax deductible, Congress will allow a major portion of the Hispanic community to afford homes, bringing a sense of stability and pride to millions of Hispanic families. We applaud this commitment to the Hispanic community and countless others who will benefit from the tax break. Congress should make this important deduction permanent."
"Many Latinos need loans with private mortgage insurance because they are unable to afford the 20 percent down payment traditionally needed to buy a home," said Guarione M. Diaz, president and CEO of the Cuban American National Council. "A tax deduction for those mortgage insurance premiums moves these families closer to fulfilling this part of their American dream."
"This tax deduction will be especially beneficial to minorities, as a third of beneficiaries of this new tax break are expected to be minority homeowners," said Manny Mirabal, president and CEO of the National Puerto Rican Coalition. "This new deduction will help more hardworking Hispanic families and consumers become homeowners and close the 20-point gap between the Hispanic homeownership rate and the national rate of 68 percent."
The new tax break for mortgage insurance premiums comes at a time home buyers and families seeking to refinance are facing changing real estate market conditions and hearing increasing warnings of exotic loan risks from government regulators. With rising interest rates and slower appreciation of home prices, many people who used exotic loan structures are being surprised with higher monthly payments.
Private mortgage insurance premium prices vary based on the size of the down payment, type of mortgage and amount of insurance coverage. The cost of PrivateMI for a median-priced home-the projected national median price in 2007 for a single family home is $224,500- ranges from $50 to $100 per month.
"This new tax deduction will make loans with private mortgage insurance even more attractive for home buyers who are on the cusp of homeownership," said Suzanne Hutchinson, MICA executive vice president.