Archive for March, 2006
Is PMI Tax Deductible?
With tax season just around the corner, many taxpayers are looking for any and all deductions possible to increase their refunds or minimize their payments, depending on their situation. Homeowners often benefit from being able to deduct mortgage insurance, late payments and any mortgage points paid during the year. But one question often comes up “is my private mortgage insurance (PMI) deductible?”
The answer is a resounding NO. Private mortgage insurance is not tax deductible. Many borrowers consult their tax advisors prior to borrowing or refinancing to see if paying a higher interest rate makes sense versus paying PMI. If you are considering refinancing or purchasing this year, you should consult your tax advisor on the pros and cons of PMI.
For more information about mortgage tax benefits, check out some of the links below:
Piggyback Loans Can Solve PMI Riddle
When buying a new home without a 20 percent downpayment, many borrowers are forced to pay for costly private mortgage insurance or PMI. Although not all mortgage loans require PMI in these situations, any mortgage that is backed by Fannie Mae or a similar government type loan will require PMI payments.
One alternative to paying PMI is to setup your mortgage in the beginning as a piggyback loan. Also referred to as 80/20, 80/10/10 or 80/15/5 mortgage loans, piggyback loans are a good alternative to PMI payments.
So what exactly is a Piggyback loan? It’s a second mortgage that you close simultaneously to your first mortgage for the remainder of the home’s costs in which you do not have downpayment money.
For example, let’s say you’re buying a $100,000 home. You have $5,000 to use as a downpayment and you want to avoid PMI. You would apply for an 80/15/5 piggyback loan. At closing, you would have a first mortgage for $80,000 (80% of your home’s value), a $15,000 second mortgage (15% of your home’s value) and you would invest 5% of your own money which would become equity.
So what if you don’t have 5% to put down? This is where you would get an 80/20 piggyback loan. In this case, 80% of the loan is on your first mortgage and the remaining 20% goes on your second mortgage. You would have no equity in this case.
For more information on PMI, check out AmericanLoanShopper.com at the link below:
http://www.americanloanshopper.com/pmi/pmi.htm