Homeowners are well aware of the many home-related tax breaks they can claim each filing season.
But there also are a lot of added costs that come with purchasing a home. For buyers unable to make a down payment of at least 20 percent of their home’s purchase price, one of those costs is private mortgage insurance, or PMI. A PMI policy is coverage that you, the homebuyer, pay for, but it protects your lender in case you default on the loan.
Now, however, some PMI payers can use those insurance payments as a tax deduction when they file their returns.
This tax deduction was created as part of the Tax Relief and Health Care Act of 2006 and originally applied to private mortgage insurance policies issued in 2007.
But because the housing market was slow to recover, lawmakers have extended this tax break. It now is in effect for premiums paid through 2011.
The private mortgage insurance deduction can be taken for policies issued by private insurers as well as insurance provided by the Federal Housing Administration, the Department of Veterans Affairs and the Department of Agriculture’s Rural Housing Service.
If you itemize deductions you will find the private mortgage insurance deduction in the “Interest You Paid” section of Schedule A. It is claimed on line 13.
What amount of PMI do you claim? You should find the amount in box 4 of the Form 1098 (or the substitute year-end loan information statement) that your lender sent you.
While it’s easy to claim the PMI deduction, make sure you meet the requirements.
First, note when you paid the mortgage insurance. The deduction is allowed only if you took out the mortgage on which you pay PMI on or after Jan. 1, 2007. No PMI premiums are deductible if they were made in connection with a home loan that was made before that date.
Any associated PMI premiums on new mortgages issued through 2011 will qualify for the deduction.
If you refinanced your home since Jan. 1, 2007, you also qualify for the PMI deduction on that loan. Be careful how you structure your refi. The mortgage insurance deduction applies to refinances up to the original loan amount, but not to any extra cash you might get with the new home loan.
You also might be able to deduct private mortgage insurance payments on a second home loan. As with your primary residence, the loan on the second home must have been issued in 2007 or later to be deductible.
The additional property also must be for your personal use as a second or vacation home. If you rent it out, then you could end up paying the PMI without any help from the Internal Revenue Service, unless you claim tax breaks on the home as rental property.
Finally, while there is no statutory limit on the amount of PMI premiums you can deduct, the amount might be reduced based on your income. The deduction disappears completely for most homeowners whose adjusted gross income is $109,000 or $54,500 for married filing separately taxpayers.
Mortgage rates jumped this week as investors became more optimistic about economic growth in the United States.
The 30-year fixed-rate mortgage rose 14 basis points to 4.29 percent. A basis point is one-hundredth of 1 percentage point.
The 15-year fixed-rate rose 10 basis points to 3.48 percent. The average rate for 30-year jumbo mortgages, generally loans for more than $417,000, rose 12 basis points to 4.85 percent.
The 5/1 adjustable-rate mortgage rose 10 basis point to 3.24 percent. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.
The volume of mortgage applications decreased 7.4 percent last week, compared to one week earlier, according to the Mortgage Bankers Association.
by Kay Bell Bankrate.com Mar 23, 2012
1 tax break homeowners may have missed - East Valley Tribune: Money
Showing posts with label mortgage insurance. Show all posts
Showing posts with label mortgage insurance. Show all posts
Monday, March 26, 2012
Wednesday, March 7, 2012
UPDATE 4-Obama offers mortgage relief to millions of homeowners | Reuters
* Up-front fees and annual premiums to be cut for FHA refis
* White House says up to 3 million borrowers may be eligible
* Plan marks Obama's latest proposal to help housing market
WASHINGTON, March 6 (Reuters) - U.S. President Barack Obama announced on Tuesday a cut in fees on many government-backed mortgages that he said could help millions of homeowners refinance, part of an election-year push to boost the shaky U.S. housing market.
Under the plan, a typical borrower with a loan backed by the Federal Housing Administration could save a thousand dollars a year by refinancing into a new FHA loan, the White House said. The fee reductions would be on top of any savings from a lower interest rate.
Two million to three million borrowers would be eligible, although the White House said participation would more likely number in the "hundreds of thousands."
The step is the latest in a series by the Obama administration to aid a depressed U.S. housing market and homeowners threatened by a rising tide of foreclosures.
About 11.1 million Americans now owe more than their homes are worth.
"I'm not one of those people who believe that we just sit by and wait for the housing market to hit bottom," Obama said at a news conference. "There are real things we can do right now that would make a substantial difference in the lives of innocent, responsible homeowners."
Obama, who faces re-election in November, introduced the cut in mortgage fees alongside efforts to compensate members of the military who may have been wrongfully foreclosed.
The lower fees being put in place would be available to borrowers seeking a new loan through FHA's streamlined refinancing program, and even borrowers who owe more on their mortgage than their homes are worth would be eligible.
Under the streamlined program, borrowers must be current on their payments and income verifications, and appraisals are waived. The reduced fees announced today would be available to borrowers who are refinancing loans taken out before June 1, 2009.
BROAD BENEFITS FOR THE ECONOMY
Of the 5.4 million 30-year fixed-rate mortgages that the FHA backs, 3.2 million would not be eligible because they were issued after the June 1, 2009, cut-off date, according to Mahesh Swaminathan, an analyst at Credit Suisse Group AG.
The reduced fees, though, should help enough homeowners that there will be a positive ripple effect throughout the U.S. economy, according to Jaret Seiberg, senior policy analyst with Guggenheim Securities.
"This should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services," Seiberg wrote in a note to Guggenheim clients.
The biggest banks, such as Wells Fargo & Co., Bank of America Corp and JPMorgan Chase & Co., are likely to see an increase in refinancing volume, which could mean higher income from fees related to FHA mortgages, he wrote.
While mortgage rates are at historic lows around 4 percent, many Americans lack the equity to refinance. Others are locked out by tight credit conditions.
Obama has announced several changes to the administration's housing policies this year to help borrowers, including an expansion of an existing mortgage relief program that had failed to reach as many homeowners as hoped.
The latest plan, which does not need congressional approval, reduces the cost of up-front FHA mortgage insurance premiums to 0.01 percent from 1 percent of a borrower's loan balance. It also cuts the annual fee for these loans in half to 0.55 percent.
Many FHA borrowers have found refinancing prohibitive in recent years because of increased insurance premiums. The administration has been raising fees for FHA loans to shore up the agency's dwindling capital and shrink its footprint in the market. The agency backs about a third of all new mortgages.
MILITARY PERSONNEL TO GET RELIEF
The White House also announced more details about an agreement with mortgage servicers to compensate people serving in the military and veterans who faced wrongful foreclosure.
It said servicers will reviews thousands of foreclosures on properties owned by members of the military and will pay those whose homes were wrongly seized the amount of lost equity plus interest and $116,785.
The administration is also seeking refunds for military personnel who were wrongfully denied refinancing.
by Margaret Chadbourn Reuters Mar 6, 2012
UPDATE 4-Obama offers mortgage relief to millions of homeowners | Reuters
* White House says up to 3 million borrowers may be eligible
* Plan marks Obama's latest proposal to help housing market
WASHINGTON, March 6 (Reuters) - U.S. President Barack Obama announced on Tuesday a cut in fees on many government-backed mortgages that he said could help millions of homeowners refinance, part of an election-year push to boost the shaky U.S. housing market.
Under the plan, a typical borrower with a loan backed by the Federal Housing Administration could save a thousand dollars a year by refinancing into a new FHA loan, the White House said. The fee reductions would be on top of any savings from a lower interest rate.
Two million to three million borrowers would be eligible, although the White House said participation would more likely number in the "hundreds of thousands."
The step is the latest in a series by the Obama administration to aid a depressed U.S. housing market and homeowners threatened by a rising tide of foreclosures.
About 11.1 million Americans now owe more than their homes are worth.
"I'm not one of those people who believe that we just sit by and wait for the housing market to hit bottom," Obama said at a news conference. "There are real things we can do right now that would make a substantial difference in the lives of innocent, responsible homeowners."
Obama, who faces re-election in November, introduced the cut in mortgage fees alongside efforts to compensate members of the military who may have been wrongfully foreclosed.
The lower fees being put in place would be available to borrowers seeking a new loan through FHA's streamlined refinancing program, and even borrowers who owe more on their mortgage than their homes are worth would be eligible.
Under the streamlined program, borrowers must be current on their payments and income verifications, and appraisals are waived. The reduced fees announced today would be available to borrowers who are refinancing loans taken out before June 1, 2009.
BROAD BENEFITS FOR THE ECONOMY
Of the 5.4 million 30-year fixed-rate mortgages that the FHA backs, 3.2 million would not be eligible because they were issued after the June 1, 2009, cut-off date, according to Mahesh Swaminathan, an analyst at Credit Suisse Group AG.
The reduced fees, though, should help enough homeowners that there will be a positive ripple effect throughout the U.S. economy, according to Jaret Seiberg, senior policy analyst with Guggenheim Securities.
"This should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services," Seiberg wrote in a note to Guggenheim clients.
The biggest banks, such as Wells Fargo & Co., Bank of America Corp and JPMorgan Chase & Co., are likely to see an increase in refinancing volume, which could mean higher income from fees related to FHA mortgages, he wrote.
While mortgage rates are at historic lows around 4 percent, many Americans lack the equity to refinance. Others are locked out by tight credit conditions.
Obama has announced several changes to the administration's housing policies this year to help borrowers, including an expansion of an existing mortgage relief program that had failed to reach as many homeowners as hoped.
The latest plan, which does not need congressional approval, reduces the cost of up-front FHA mortgage insurance premiums to 0.01 percent from 1 percent of a borrower's loan balance. It also cuts the annual fee for these loans in half to 0.55 percent.
Many FHA borrowers have found refinancing prohibitive in recent years because of increased insurance premiums. The administration has been raising fees for FHA loans to shore up the agency's dwindling capital and shrink its footprint in the market. The agency backs about a third of all new mortgages.
MILITARY PERSONNEL TO GET RELIEF
The White House also announced more details about an agreement with mortgage servicers to compensate people serving in the military and veterans who faced wrongful foreclosure.
It said servicers will reviews thousands of foreclosures on properties owned by members of the military and will pay those whose homes were wrongly seized the amount of lost equity plus interest and $116,785.
The administration is also seeking refunds for military personnel who were wrongfully denied refinancing.
by Margaret Chadbourn Reuters Mar 6, 2012
UPDATE 4-Obama offers mortgage relief to millions of homeowners | Reuters
Monday, March 5, 2012
FHA to hike premiums on mortgages
NEW YORK (CNNMoney) -- In an effort to bolster its capital reserves, the Federal Housing Administration is planning to hike the insurance premiums it charges borrowers.
Beginning April 1, the agency, which is the largest insurer of low-down payment mortgages, will raise the up-front insurance premium it charges borrowers by 75 basis points to 1.75% of the base loan amount.
In addition, annual insurance premiums will go up 0.1 percentage point for loans under $625,500 and 0.35 points for loans that exceed that amount.
The agency said the hikes are necessary to replenish the agency's declining capital reserves, which fell below the level mandated by Congress back in 2009.
Further red flags were raised in November when the agency's annual report warned that if home prices continued to drop in the coming year, the agency's losses could exceed its reserves.
"After careful analysis of the market and the health of the [Mutual Mortgage Insurance] fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market," said acting FHA commissioner Carol Galante.
Why the Fed can't fix housing
Borrowers will be able to roll the higher up-front fees into their mortgage balance, which should help borrowers better afford the cost. Combined, the higher up-front fees and the 0.1 point premium increase are expected to add about $5 to the average monthly mortgage payment for FHA loans, according to the agency.
Even though those payouts may seem nominal, it's bad news for the housing market, said Jaret Seiberg, an analyst with the Washington Research Group. He said the hikes will discourage sales to first time homebuyers by making it more expensive to borrow thereby depriving sellers of potential buyers.
The impact of the increase, however, is less severe than it could have been because most of it is in the upfront fee, which is far less damaging than a boost in the premium, according to Seiberg. Builders will also suffer as FHA-insured loans remain an important source of financing for their buyers, he added.
By Les Christie @CNNMoney February 28, 2012: 8:13 AM ET
FHA to hike premiums on mortgages
Beginning April 1, the agency, which is the largest insurer of low-down payment mortgages, will raise the up-front insurance premium it charges borrowers by 75 basis points to 1.75% of the base loan amount.
In addition, annual insurance premiums will go up 0.1 percentage point for loans under $625,500 and 0.35 points for loans that exceed that amount.
The agency said the hikes are necessary to replenish the agency's declining capital reserves, which fell below the level mandated by Congress back in 2009.
Further red flags were raised in November when the agency's annual report warned that if home prices continued to drop in the coming year, the agency's losses could exceed its reserves.
"After careful analysis of the market and the health of the [Mutual Mortgage Insurance] fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market," said acting FHA commissioner Carol Galante.
Why the Fed can't fix housing
Borrowers will be able to roll the higher up-front fees into their mortgage balance, which should help borrowers better afford the cost. Combined, the higher up-front fees and the 0.1 point premium increase are expected to add about $5 to the average monthly mortgage payment for FHA loans, according to the agency.
Even though those payouts may seem nominal, it's bad news for the housing market, said Jaret Seiberg, an analyst with the Washington Research Group. He said the hikes will discourage sales to first time homebuyers by making it more expensive to borrow thereby depriving sellers of potential buyers.
The impact of the increase, however, is less severe than it could have been because most of it is in the upfront fee, which is far less damaging than a boost in the premium, according to Seiberg. Builders will also suffer as FHA-insured loans remain an important source of financing for their buyers, he added.
By Les Christie @CNNMoney February 28, 2012: 8:13 AM ET
FHA to hike premiums on mortgages
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