Kelly L. Zitlow

Mortgage Insurance Tax Deduction Reminder!

With 3% down conventional mortgages once again available in the Arizona market and with FHA's loan limit set to decrease Oct 1, 2011 we expect conventional mortgage volume to increase over the coming months! While conventional mortgage guidelines can be a bit more stringent than FHA loans they do offer competitive mortgage insurance rates as well as more financing options than a FHA Loan does.

Whether it's a FHA Loan or a Conventional Mortgage we do see many Arizona home buyers today choosing to put down less than 20% which generally means some type of mortgage insurance will be required. That being said, as more Arizona home buyers utilize low down payment loans with mortgage insurance we are often asked if mortgage insurance is still tax deductible. The answer is....it might be! Below is a quick summary of the guidelines relative to mortgage insurance tax deductibility. As a reminder, buyers should consult their tax advisor for specifics regarding tax related deductions.

• The federal law provides for an itemized deduction on federal tax returns for the cost of private mortgage insurance paid by eligible borrowers. Prior to 2007, borrowers could not deduct the cost of their mortgage insurance payments. The law has been extended to December 31, 2011.
• Borrower-paid mortgage insurance premiums will be 100% deductible for eligible taxpayers who are married, single or head-of-household and who earn up to $100,000. The amount of the deduction phases out in 10% increments for those who have adjusted gross incomes between $100,000.01 and $109,000 annually.
• The deduction can apply for up to two "qualified residences".  Investor loans are not eligible.
• Up Front Mortgage Insurance Premiums are deductible over 7 years or the life of the loan, except for the VA Funding Fee and the USDA Rural Housing guarantee fee which are deductible in the year they were paid.

Affordable prices combined with low down payment mortgage financing options and historically low interest rates are driving our Arizona real estate market today! Don't hesitate to call me should you have mortgage questions or want to discuss future changes are on the horizon that will impact mortgage lending.

Make it a great week!

Kelly

Quote of the week: Time is the coin of your life.  It is the only coin you have, and only you can determine how it will be spent.  Be careful lest you let other people spend it for you.  ~ Carl Sandburg

Please note: this information is general in nature and is not intended as investment, tax or real estate advice.  Please refer to your independent tax advisor for further information.

First Posted 8/22/2011