Debunking MI Myths
Separating Pulp from Fiction
Myth #1: Most borrowers won’t benefit from borrower-paid MI tax deductibility.
Of the millions of people who itemize their taxes, the greater percentage claim mortgage interest as a deduction. Since it follows that those who have loans with borrower-paid MI will choose to itemize their premiums, it is anticipated that hundreds of thousands of homeowners will benefit from MI tax-deductibility, now extended through 2010.*
Myth #2: Sure, MI can be cancelled…but it’s a very difficult process.
Not true. Most lenders have simplified the process to allow borrowers in good standing to cancel 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 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 borrower-paid 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.†
Myth #3: MI only benefits lenders, not borrowers.
MI clearly benefits borrowers by making it possible for them to afford homes with
down payments of less than 20%. Plus, PMI doesn’t just sell MI to lenders. We go beyond to help ensure homebuyer success by offering pre-purchase homebuyer education and post-purchase homeowner assistance counseling for borrowers with PMI-insured loans.
*Subject to restrictions under the Internal Revenue Code. MI tax-deductibility is based on transactions closed in 2009-2010 and borrower-paid MI premiums allocable to those years. 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 Homeowners Protection Act and applicable state law. |
