Mortgage Insurance - a good thing?
by Kaushik Sirkar, Chandler REALTOR®
Chandler AZ Real Estate

Most of us are aware of the recent legislation which changed the way the IRS views mortgage insurance.  In 06', mortgage insurance became tax deductible.  I saw a fairly big rush of lenders and Real Estate Agents make the case to their clients and prospective clients that this was a good thing.

An article that I just read on Inman suggests otherwise.  The author suggests that this was an example of 'poor public policy'.  That in effect, this piece of legislation de facto creates an incentive for prospective homeowners to put down LESS money.  I believe that the author is suggesting we do whatever we can to promote larger downpayments as these serve as cushions when homes aren't appreciating at XY % per year.

Another point the author makes - why is there such a limitation as to income levels and why is this deduction ONLY permitted in tax year 2007?

I'll be honest - when this came out, I probably thought it was a good thing...at least likely not a bad thing.  And until reading this article, I didn't think too much about it.

I pose a question to all AR members, and specifically to some of my favorite lenders, Brian Brady, George Souto, and Jeff Belonger what are your thoughts on this issue?  For or against the tax deductibility of mortgage insurance?

Thanks for Reading :)

Kaushik Sirkar, Chandler Realtor®
http://www.homesphx.com

 
This post has been included in Arizona Real Estate News

7 Comments on Mortgage Insurance - a good thing?

APR
25
2007
1 Featured Post

Good argument - but I failed to read in Inman's article the benefits of mortgage insurance.  Instead of "pushing products" onto customers, loan originators/ officers really should give consumers their mortgage options, to include borrower paid mortgage insurance, lender paid mortgage insurance or the 80/20 combo loans.
9:35pm • #1
738,191 Points 231 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Kaushik....  In regards to mortgage insurance and the write off?  It does bridge the gap for some homeowners than once before... meaning, there could be some savings.  But I still would need more information. Example... different loan amounts will give results. Sorry if this isn't the best answer. I just haven't had much experience in giving scenarios on the advantages and disadvantages. 

Several reasons, I am starting to do more FHA loans. Still doing some sub prime loans... and the conventional loans that I am doing, are 100% financing. If I had to weigh the pluses and minuses, I would say that it's not as much as an advantage than it sounded. It gets me back to one major point, GOALS. Knowing how long someone is going to be in the house will help me determine which option is better for that specific client. Here are some examples in  a blog that I once wrote:PMI (Private Mortgage Insurance); why you need it and the different types of PMI……  This should give a better explanation.

 And thanks for the mention, it's much appreciative.

                                                                                                      jeff belonger

9:57pm • #2
294,780 Points 11 Featured Posts Outside Blog Attended Rain Camp

Dear Kaushik,

Good point here, well let me tell you something that I think, hm...  community programs with lenders they are accepting the 100% these days, so it is up to them to give all those programs. but those lenders are very strict to check appraisals so they will know that it will not be any problem later on.

thanks for bringing it up :)  good job !!!
10:07pm • #3
1,388,133 Points 255 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Ray, first this is just a pilot program that is why it is only for 2007.

Second, for the writer of the article to suggest that people are going to put down less money so that they can get a bigger tax deduction is crazy.  People don't want to pay PMI, but if they have to this gives them a little help.

I like the deduction and hope that it continues. 
10:29pm • #4
APR
26
2007
8 Featured Posts

Doug - agreed - the best lenders do present options to their clients!

Jeff - This is the kind of feedback I was looking for!

Ray - My pleasure!

George - First mention of why only 2007.  I agree with you George on your point # 2!
1:23am • #5
294,780 Points 11 Featured Posts Outside Blog Attended Rain Camp

George, thanks for expand the information :)

 
3:57am • #6
1,388,133 Points 255 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Kaushik, the only explanation that I have gotten on why only 2007, was that the Bill was not going to pass if it wasn't done this way.  The Republicans wanted to make it permanent and the Democrats wanted to see how it would work first before they made it permanent.
7:11am • #7


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Kaushik Sirkar

Chandler, AZ

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