If your mortgage is paid off, don’t read this item.
If you plan to buy a house, and to put down more than 20%, you can skip this item.
If you are like 50% of the population and put less than 20% down on a real estate purchase, then you want to know about this.
Private Mortgage Insurance (PMI) is now tax deductible. PMI is a insurance premium paid monthly by borrowers who put less than 20% down on a property. It does nothing for the borrower, but protects the lender if the borrower defaults.
No one wants to pay PMI so "piggyback" mortgages developed. These avoid PMI because the first mortgage is usually 80% of the purchase price and there is a second mortgage (at a higher rate) for the extra 10 or 20%. The interest paid on both mortgage is deductible. PMI virtually disappeared from real estate closing for the last few years.
Now it may be worth at least considering. Rules: If your income is less than $110,000.00 and if you itemize deductions, you can deduct PMI premiums effective 1/1/07.
Now, more than ever, you need a competent mortgage broker to evaluate the options for you.
(I don’t know why Congress always does this, but the law expires at the end of 2007.)
Update: President Bush signed this on 12/20/06 See story.
Many clients have condos in Florida, but their primary residence is here in the northwest suburbs of Chicago. Of that group, some choose to become Florida residents and change their "domicile" to Florida.
New York attorney Allan Lipman has put together a nice on-line audio seminar that explains many of the issues that surround making Florida your residence. While he mainly covers New Yorkers with condos in Florida, the concept is the same for Illinois residents. Give it a listen if you are considering making Florida your tax and voting "home."
The real estate market has been slowing down since the fall of 2005. It seems to me that it’s way more than a slowdown. Business writer Scott Burns, whose column I enjoy, writes that many sellers are becoming "condo slaves," meaning they are stuck with real estate worth less than they paid for it initially.
In Palatine, the market for high end homes is almost nonexistent. There are 62 houses on the market between $600k and $800k and most of them are newly built houses put up after tearing down an older house. Only 2 of these 62 houses have contracts on them. That’s pretty bad. In the $250k to $450k range it’s a little better. About 17 out of 100 homes currently on the market have sold.
I have many clients that have had homes on the market for more than 6 months and cannot sell. It’s more important that ever to buy with a contingency on the sale of your current home. No one wants to be left with 2 houses for a year or more.