New deduction for 2007 tax year is something buyers should factor into

home-financing calculations

    WASHINGTON, April 4 /PRNewswire/ -- Many consumers will enter this
 year's spring home buying season with a new tax deduction that can put
 extra money in their pockets when they file their taxes next year. The
 reason: a new federal tax deduction allows many qualified families to
 write-off premiums for private and government mortgage insurance on loans
 that close in 2007.
     This is the first time that homeowners with low down payment loans will
 be able to deduct the cost of their mortgage insurance premiums, resulting
 in an average annual tax savings ranging between $300 and $350 for
 taxpayers taking the deduction.
     Under the new law, passed by Congress and signed by President Bush late
 last year, private mortgage insurance (PrivateMI) premiums are fully tax
 deductible for borrowers who buy or refinance a home this year if their
 adjusted gross income is $100,000 or less. Families with incomes of more
 than $100,000 and up to $109,000 will be eligible for a reduced deduction.
     Since the new deduction is effective for the 2007 tax year, tax day in
 April 2008 could bring a bigger refund to qualified borrowers who buy or
 refinance homes this year with tax-deductible private mortgage insurance.
     A broad coalition of tax, consumer, civil rights and civic groups
 strongly supported the mortgage insurance deduction.
     "Making mortgage insurance tax deductible will amount to real savings
 for people who need it the most -- families who've worked hard to get into
 their first homes," said Pete Sepp of the National Taxpayers Union. "Our
 tax code has long recognized the importance of allowing costs associated
 with home financing to be tax deductible, and mortgage insurance premiums
 should be no exception. Congress should uphold this principle by extending
 the federal tax deduction for mortgage insurance."
     "Tax deductible mortgage insurance results in hundreds of dollars in
 savings for low to middle-income families. This important step towards
 homeownership was long overdue, and it is time for families to take
 advantage of the new deduction," said Bruce Hahn, president of the American
 Homeowners Grassroots Alliance (AHGA). "Making the deduction permanent
 would help lower income and first time home buyers, promote stability in
 the housing market, maintain home values and limit the impact of the
 current mortgage turmoil."
     "Like many Americans, Latinos rely on homeownership to build wealth and
 are entering the housing market to get a piece of their American Dream,"
 said Brent Wilkes, Executive Director of the League of United Latin
 American Citizens (LULAC). "This is a well-deserved tax deduction designed
 to help those who need it most -- families who are buying a home without a
 big down payment."
     "Homeownership fosters strong communities," said Melanie Campbell,
 Executive Director/CEO of the National Coalition on Black Civic
 Participation. "This new tax deduction can help low and moderate income
 families move one step closer to realizing their dream of owning a home."
     This new law comes at a time when real estate market conditions are
 changing and increasing warnings of exotic loan risks are being voiced by
 government regulators.
     Mortgage insurance plays a crucial role in maintaining the stability
 and health of the mortgage finance system. With rising interest rates and
 slower appreciation of home prices, many people who used exotic loan
 structures are being surprised with higher monthly payments.
     "A loan with private mortgage insurance is a smart choice for many home
 buyers in today's market, especially low- and moderate-income families,"
 said Steve Smith, Chief Executive Officer of The PMI Group, Inc. and
 President of Mortgage Insurance Companies of America (MICA). "PrivateMI has
 always been an easy and predictable way for buyers to finance their home
 purchase, and it can be canceled when it's no longer needed. Now, this new
 tax deduction makes it an even better choice."
     Compared to other financing options, a mortgage loan with PrivateMI is
 often more affordable. Its fixed, predictable and cancelable premiums
 provide consumers with peace of mind -- and now a tax deduction.
     Private mortgage insurance premium prices vary based on the size of the
 down payment, type of mortgage and amount of insurance coverage. The cost
 of PrivateMI for a median-priced home -- the projected national median
 price in 2007 for a single family home is $224,500 -- ranges from $50 to
 $100 per month.
     "This new tax deduction will make loans with private mortgage insurance
 even more attractive for home buyers who are on the cusp of homeownership,"
 said Suzanne Hutchinson, MICA Executive Vice President. "The wide-ranging
 group of organizations that support this important tax break will certainly
 be working to extend the deduction beyond 2007."
 
 

SOURCE Mortgage Insurance Companies of America