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Making Mortgage Insurance Deductible

October 10th, 2007 · 6 Comments

PMI, commonly referred to as mortgage insurance, is required by a lender when a borrower does not have 20% to put down on a mortgage. On the one hand it allows consumers to buy properties without such a large sum of money but on the other hand it is a total waste.

Consumers have been getting second mortgages for the remainder of the 20% down payment to avoid paying mortgage insurance for years. It’s been an obvious choice since the interest on the second mortgage is deductible. The only downside of getting a second mortgage is that they are usually amortized over 15 years and at an adjustable rate. They are exactly like the loans the financial institutions in this country are having problems with at the moment.

The Tax Relief & Health Care Act of 2006 allows this deduction only for households that make $100,000 or less and originate a loan in 2o07. I’ve always felt that paying mortgage insurance is a waste of money and now bills have been introduced in the Senate (S. 1416) and the House (H.R. 1813) to make this deduction permanent. We all need to speak out on this issue and get this legislation passed. You can even speculate that the sub prime mortgage crisis is partly due to the lack of this deduction.

Tags: Mortgages · Real Estate Tips · Videos About Real Estate

6 responses so far ↓

  • 1 Mortgage » Making Mortgage Insurance Deductible // Oct 10, 2007 at 10:00 pm

    […] unknown wrote an interesting post today onHere’s a quick excerptConsumers have been getting second mortgages for the remainder of the 20% down payment to avoid paying mortgage insurance for years. It’s been an obvious choice since the interest on the second mortgage is deductible. … […]

  • 2 Joe Bartolotta // Oct 11, 2007 at 12:31 am

    I agree 100% with you, the deduction needs to be permanent. We should also look at raising the income restriction to 125K per year. I hope you don’t mind, but your blog has given me an idea to write an article for my blog about PMI. I will reference your blog and post a link to this article.

    Best of luck to you.

    Joe

  • 3 Hojin Chang, Real Estate Real Easy // Oct 11, 2007 at 1:07 am

    Thank you Joe for your kind words and I would appreciate anyone who spreads the word about this topic.

  • 4 Mortgage-Insurance » Blog Archives » Private Mortgage Insurance (PMI) by RentLaw.com // Oct 18, 2007 at 5:51 pm

    […] Making Mortgage Insurance DeductibleConsumers have been getting second mortgages for the remainder of the 20% down payment to avoid paying mortgage insurance for years. It’s been an obvious choice since the interest on the second mortgage is deductible. … Posted in Mortgage-Insurance | Trackback | del.icio.us | Top Of Page […]

  • 5 Mortgage-Insurance » Blog Archives » PMI Mortgage Insurance Co. Heralds House Vote to Extend Tax ... // Oct 20, 2007 at 5:39 am

    […] Making Mortgage Insurance DeductibleConsumers have been getting second mortgages for the remainder of the 20% down payment to avoid paying mortgage insurance for years. It’s been an obvious choice since the interest on the second mortgage is deductible. … […]

  • 6 Melanie // Apr 11, 2008 at 2:09 am

    I’m understanding you, but I’m not agreeing with you. But anyway I’m sorry that I don’t know the right thing to do in that situation