Friday, January 21, 2011

Mortgage Insurance


Mortgage insurance, also known as (PMI) Private Mortgage insurance or (LMI) Lender's Mortgage Insurance is an extra insurance that lenders require from most home buyers who obtain loans that are more than 80% of their new home's value. It is an insurance policy taken to protect the lender against loss if a borrower defaults on a loan and it enables borrowers with less cash to have greater access to home ownership.

The first mortgage insurance payment is paid at the time of closing. The rest will
be made each month together with the principal and interest payment.

The insurance payment may be canceled if the borrower has completed the payment of 20% of the total property amount. However, the cancellation must be requested by the homeowners themselves. Consumers themselves have to keep track of their loan balance if they qualify to discontinue the PMI coverage. The borrower also needs to present payment receipts showing that there was no 30 days late payment within a period of 1 year of the request or 60 days late within two years. The lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan
.

Refer to https://www.wellsfargo.com/mortgage/faq/privatemortgage for more information.  Or approach a Realtor to learn more about Mortgage Insurance.


Thursday, January 13, 2011

Mortgage Interest Deduction

The President's Commission on Fiscal Responsibility and Reform recently proposed changing the Mortgage Interest Deduction law. Under the current law, taxpayers can deduct the interest payments on up to $1 Million of mortgage debt for principal and second residences and they can deduct payments on an additional $100,000 of a home equity loan from their taxable income.

As a result, in 2009, these deductions lowered the tax revenue by about $86 billion and are expected to lower tax revenues by nearly $500 billion from 2010 through 2013. For a home buyer to avail these deductions, he/she must itemize the taxes for deductions. As a rule, if the amount of mortgage interest and points paid during 2010 exceeds the standard deduction ($5700 for single taxpayers, $11400 for married taxpayers filing jointly and $8400 for head of household), he/she will benefit from the tax deduction. The deduction lowers the tax burden by more for those in the higher tax brackets. For more information on the existing Mortgage Interest Deduction check out http://taxes.about.com/od/deductionscredits/a/MortgageDeduct.htm

The proposal recommends to change the deduction (currently available only to those who itemize their taxes) to a non-refundable credit available to all taxpayers. The credit will equal 12% of interest payments on up to $500,000 of mortgage debt for principal residences. The proposed tax credit will not be applicable to second residences or for home equity loans. These changes will increase government tax revenue and will redistribute the mortgage tax benefits from higher-income tax filers toward lower-income tax filers. Check out http://www.cbsnews.com/stories/2010/12/05/eveningnews/main7120630.shtml for details on the proposed Mortgage Interest Deduction.

In the new poll conducted by Wall Street Journal/NBC News says that 60% of Americans found it totally or mostly acceptable to eliminate the mortgage deduction on second homes, home equity loans and any portion of a mortgage over $500,000.

On the other hand, in an online survey conducted by Harris Interactive which was commissioned by National Association of Realtors, said that in the 3,000 homeowners and renters who responded, nearly three fourths of homeowners and tw0-thirds of the renters said that the mortgage interest deduction was extremely important to them. In a country that has recently recovered from the subprime crisis, NAR firmly believes that any change in the current housing policies will hamper the economic recovery, raise foreclosures and hurt banks' abilities to lend and likely push the economy into another recession resulting to more job losses in the country.

NAR said that they will continue to oppose any plan to modify or exclude the deductibility of mortgage interest.

If you need to learn more about Mortgage Interest Deduction, it is highly recommended to consult with a Realtor.