MI Makes Sense
Mortgage insurance helps millions of families qualify for homes sooner. It’s safe, smart, and secure. And it's tax-deductible.
Good for the homebuyer. Good for the lender.
Since MI helps protect lenders from the high costs of foreclosure, it allows them to accept a lower down payment. This provides considerable benefits to the homebuyer:
- Take advantage of 100% tax deductibility. Eligible borrowers with adjusted gross incomes up to $100,000 can deduct 100% of their 2009 borrower-paid MI premiums on their federal tax returns.*
- Buy a home sooner. With a lower down payment. No need to wait until you've built up a 20% down payment. With the protection of MI, many borrowers can qualify with a down payment as low as 5%.
- Buy more home. Or buy into a higher-priced market. Just do the math. A 5% down payment on a $200,000 home is $10,000. A 20% downpayment on that same home is $40,000.
- Keep more of your savings. Sidestep a cash crunch by reducing your down payment. With MI, you might even have savings left over to furnish your new home.
- Cancel borrower-paid MI when you’ve built up enough equity. Most lenders have simplified the process to allow borrowers in good standing to cancel their mortgage insurance when the home’s current value, determined by an appraiser, has increased so that the loan-to-value (LTV) ratio of the property is 75% or less. In addition, the federal Homeowners Protection Act (HPA) of 1998 requires that borrower-paid MI be cancelled automatically once the borrower has paid down the loan to an LTV of 78%, based on the original value of the property. And MI may also be cancelled by written request of the borrower once the principal balance is paid down to 80% of the original purchase price.**
*Based on transactions closed in 2009, and MI premiums paid in 2009 and allocable to 2009. Deductions are phased out in 10% increments for borrowers with adjusted gross incomes between $100,000 and $109,000.
PMI cannot provide tax advice. Taxpayers should consult their own tax advisors concerning applicability of this new deduction to their particular circumstances under the Internal Revenue Code and the laws of any other taxing jurisdiction. This information is not intended or written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties.
**Subject to the federal Homeowner’s Protection Act and applicable state law.
