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Mortgage Insurance FAQ
The following is an FAQ (frequently asked questions) which answers commonly asked questions.
Why is mortgage insurance now tax-deductible?
Congress recently passed legislation that allows mortgage insurance premiums to be tax-deductible on loans originated for transactions beginning Jan. 1, 2007.
Who is eligible for the MI deduction?
Borrowers with household adjusted gross incomes of $100,000 or less purchasing a home in 2007 will able to deduct the full cost of the mortgage insurance they pay during the 2007 tax year. For adjusted gross incomes between $100,00 and $109,000, deductions are phased out at 10% increments. Clients should consult their tax advisors for complete details.
How does the MI tax deduction work?
Just as your interest payments on your mortgage are tax-deductible, reducing your overall taxable income, you will now be able to deduct the mortgage insurance portion of your payment as well.
How much will a typical homeowner with MI save?
We estimate that eligible homeowners will save $200-$400 annually.
How much of the MI premium can be deducted?
Borrowers with household adjusted gross income of $100,000 or less will able to deduct the full cost of the mortgage insurance they pay during the 2007 tax year. For adjusted gross incomes between $100,00 and $109,000, deductions are phased out at 10% increments.
How many people use mortgage insurance?
Approximately 10 million people now use MI. Mortgage Insurance is a critical factor in helping first-time, low-income, middle income families and emerging market buyers become homeowners. Over the last five years, MI programs covered 47% of all home purchase loans made to African American and Hispanic borrowers, and 47% of borrowers with incomes below the median income for their area.
Why did this legislation pass?
Homeownership helps create stable and safe communities. That’s why expansion of homeownership has been a long-standing goal of the Federal government. The added deduction for MI will help put that goal within reach for many groups that have typically been unable to purchase homes -- young people, low-income, and emerging market buyers.
What is a lender’s responsibility?
The lender will need to include the homeowner’s total MI premium in their end-of year statement. The homeowner is responsible for the deduction.
How will the homeowner know the amount of the MI paid?
The amount of the MI premium is listed on the disclosure documents that borrowers receive at closing. It is also listed on the annual escrow statement the borrower receives from the loan service each year.