Smart Borrower Blog

Small Help for Homeowners

Dec 30th, 2007 @ 4:24 PM by Alden Smith

Private mortgage insurance, or PMI as it is commonly known, is insurance that covers the lender in cases where they feel that not enough money is placed as a down payment, and they wish to cover the cost of the loan.  A law enabling homeowners meeting certain criteria to deduct the cost of PMI, set to expire this year, has been extended to 2010.

PMI protects the lender, not the home owner.  A typical PMI will add $50 to $100 to a monthly mortgage payment.  Deducting the cost of this insurance has been a help to homeowners.  Congress has now extended this help for more years, making it a little more bearable to pay taxes.  Although this small amount will certainly not stop homeowners in over their heads from foreclosure, it can possibly help those who are struggling yet meeting their mortgage payment.

The criteria for this deduction have been for families with a gross adjusted income (AGI) of $100,000 or less. Families with an AGI of up to $109,000 have been allowed to take a partial deduction.

Mortgage brokers are saying that low-down-payment mortgages are still widely available.  The downside for many prospective buyers is that they had better present with an extremely good credit rating to get these loans.  The days of “no money down” mortgages are long past, and will be a legacy of the mortgage market.  People holding this kind of paper are amazed to find that their homes, with the current decline in price, are probably now worth less than what they paid for them.  This only adds pressure to an already troubled market.

Mortgage experts claim that there are about 2.6 million borrowers eligible for the deduction in 2007.  Extending this deduction to 2010 can only be seen as a good thing.

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