Joining Forces to Make Mortgage Insurance a Permanent Deduction

PMI, commonly referred to as mortgage insurance, is required by a lender when a borrower does not have 20% to put down on a mortgage. On the one hand it allows consumers to buy properties without such a large sum of money but on the other hand it is a total waste.

Consumers have been getting second mortgages for the remainder of the 20% down payment to avoid paying mortgage insurance for years. It’s been an obvious choice since the interest on the second mortgage is deductible. The only downside of getting a second mortgage is that they are usually amortized over 15 years and at an adjustable rate. They are exactly like the loans the financial institutions in this country are having problems with at the moment.

Currently the mortgage insurance deduction is only available to loans originated in 2007. The Tax Relief & Health Care Act of 2006 allows this deduction for households that make $100,000 or less and originate a loan in 2o07. I’ve always felt that paying mortgage insurance is a waste of money and now bills have been introduced in the Senate (S. 1416) and the House (H.R. 1813) to make this deduction permanent. We all need to speak out on this issue and get this legislation passed. You can even speculate that the sub prime mortgage crisis is partly due to the lack of this deduction.