Comments on: Private Mortgage Insurance (PMI) Is Tax-Deductible In 2007

By: Jared

Jared — Thu, 22 Feb 2007 05:09:10 +0000

What if I refinance my home in 2007. Will I still qualify to deduct my PMI monthly fees?, which I pay $400 a month.

By: Dan

Dan — Fri, 15 Dec 2006 00:46:24 +0000

Thanks for posting this. My fiance and I just started the process of looking to buy our first home. We make a combined income of $97,000 so we might just make the cutoff. We were worried about the PMI payments because the real estate market is so expensive in Northern New Jersey and a 20% down payment would leave us living paycheck to paycheck. We’re going to have to explore this new information now and might have put off getting a mortgage contract for a few weeks.

By: Mogg

Mogg — Thu, 14 Dec 2006 06:56:23 +0000

To SavingEverything:

Would I borrow money at 6.25% to invest in a CD paying 5.3%. Let’s see, hmm… let me think… that’s a tough one. OK, let’s the math.

Pretax mortgage: 6.25%
Pretax CD: 5.3%
Marginal tax bracket: x%

Aftertax mortgage: 6.25% * (1-x)
Aftertax CD: 5.3% * (1-x)

Difference in rate on paying larger down payment as opposed to investing in CD: [6.25% * (1-x)] – [5.3% * (1-x)] = .95% * (1-x)

From a mathematical point of view, regardless of your tax bracket you save more with the larger down payment.

By: Steve

Steve — Wed, 13 Dec 2006 18:57:19 +0000

Jesse is exactly right. Also, this and the mortgage interested deduction do nothing to make homes more affordable. If you offer everyone the same subsidy, all its going to do is inflate the price of the item involved.

By: Alex - YoungFinances.com

Alex - YoungFinances.com — Wed, 13 Dec 2006 16:04:43 +0000

Oh man! I just missed this by a month and a half…

By: Jesse

Jesse — Wed, 13 Dec 2006 15:02:49 +0000

I don’t see this as a good thing really. The government is promoting the idea of not putting as much down on your house, since they’ll now be subsidizing part of that cost.

It’s kind a catch-22 though – home prices go up because of low rates and lax lending, which means fewer people can truly afford to purchase a home, which means they put less down…

By: KR

KR — Wed, 13 Dec 2006 14:57:35 +0000

This is almost certain to be extended every year like a ton of other tax provisions.

By: SavingEverything

SavingEverything — Wed, 13 Dec 2006 14:14:10 +0000

ooops… i meant “…paying 88 more to save 10,000 in my example (which would earn 5.3%CD if it wasnt utilized as down payment) is not worth it.

By: SavingEverything

SavingEverything — Wed, 13 Dec 2006 14:11:17 +0000

Is this tax deduction really worth it??? I used an online calculator for, say, $200,000 1br condo, with 5% down. Loan=190k. Rate=6.25%(as of dec12), Mortgage payment=1169. PMI=88. How do you calculate your tax savings if your mortgage payment’s interest, pmi, and property taxes bring you to the lower tax bracket? (do you assume your gross income before figuring out how much these housing expenses can save you in taxes? During the first 5yrs of mortgage, one can average 80.0% of payment as interest for itemizing purposes). If i placed 20% down, Loan=160k, mortgage payment=985, 0 PMI. (save 184/month in mortgage, but lose ~5.3% 1yr cd savings from lost down payment; but less itemized interest). So, i dont know what to think. I still think paying 88 more to save 10,000 in my example (which would earn say 5.30%CD) is not worth it. What do you think? Lastly, is it worth to take the PMI, pay the extra money so that you have 20% equity in your home to hopefully be able to cancel PMI, and would you benefit. (sadly, i dont think so.)

By: Nagel

Nagel — Wed, 13 Dec 2006 13:10:49 +0000

Great information. This needs to be known, especially now, so home owners can make better decisions on what mortgage loan structure they should have.

By: Eaken

Eaken — Wed, 13 Dec 2006 05:21:44 +0000

there are a lot of loan products out there these days that will provide a LTV of 80% + without the PMI requirement.

By: jim

jim — Wed, 13 Dec 2006 04:09:53 +0000

Interesitng… they’ve been pushing this for a while now…

By: Jonathan

Jonathan — Wed, 13 Dec 2006 03:41:08 +0000

Fixed, thanks.

By: Bob

Bob — Wed, 13 Dec 2006 03:37:13 +0000

The msnbc link doesn’t work