PMI now tax deductible

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.

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