MI Makes Sense
In Uncertain Economic Times, MI Makes Sense.
It’s hardly surprising that low downpayment loans are popular in today's mortgage market. At $221,000, the median home is out of reach for many first-time homebuyers, and most are hard-pressed to come up with $44,000 for the standard 20% downpayment.
Fact is, high-LTV loans statistically represent a greater likelihood of default. The problem is further exacerbated when combined with layers of risk, such as adjustable-rate mortgage instruments, poor credit, low documentation, and low cash reserves. In addition, high-LTV loans are increasingly in demand, and the burden is on the mortgage market to present products that reduce risk for both lenders and borrowers.
Two choices. One has always been safer. Now tax-deductible through 2010.
In the U.S., borrowers who do not make a 20% downpayment generally have two choices: a second mortgage (piggyback loan) or MI. Although earlier in this decade, the combination of rock-bottom interest rates and double-digit home appreciation often made piggybacks cheaper than MI, this is no longer the case. Now that interest rates are higher, a single loan with MI is typically cheaper over the life of the loan – especially since MI premiums are 100% tax-deductible in 2007 - 2010 for eligible borrowers with adjusted gross incomes up to $100,000.*
Get wise. Get MI.
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*Based on transactions closed in 2007 - 2010 and borrower-paid MI premiums allocable to those years. 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. |
