Passing along some important information for people who are not aware of the new change with Private Mortgage Insurance.
As of Jan 1, 2007, people planning to purchase a home will now to able to deduct Private Mortgage Insurance (PMI) on their federal income tax returns. PMI generally is required by lenders whenever the down payment is less than 20 percent. This new tax break will make the dream of homeownership more attainable. It will make loans with private mortgage insurance more affordable. In some cases,it will enable buyers to qualify for a larger loan. 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 ( a first and second mortgage ) or combo loan. Now that PMI is federally tax deductible for qualified buyers, the single loan with PMI is now affordable or, in some cases, even lower in overall cost versus 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. Homeowners may request the cancellation of PMI coverage once their home appreciates to the point that their new combined loan to value (LTV) ratio is 78 percent. Some lenders might require a new appraisal to determine this.
According to the bill passed by Congress 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 PMI generally averages one-half of one percent of the loan amount.
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