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What the New PMI Tax Deduction Can Do For Real Estate

It can mean more sales. It will most certainly mean more refinances at higher LTV’s. If you are a real estate agent you can use this as a tool for people who were hesitant to get into that dream home (because of PMI) to do so and enjoy this deduction and they can choose ONE LOAN and not a PIGGY BACK – although your mortgage professional should be the one to demonstrate the numbers for the CLIENT to make the choice. Generally speaking piggy backs have a higher blended interest rate than a single higher LTV loan but people choose them to avoid PMI. But if PMI is tax deductible that cures the need for a piggy back.

Here is something to keep in mind: The current version HR5970 only allows for the deduction on NEW LOANS and evidently terminates on 12/31/2007. In other words the deduction apparently is good for only ONE YEAR.

If this is the case then 2007 is a PUSH. Refinances should somewhat re-boom and home sales should show some recovery IF WE PROFESSIONALS understand and use this as a tool for our clients and not just to load our pockets.

On the same note but a different direction we need to grass root’s this opportunity to make this a permanent deduction. It may be a little more difficult to do with the seats being occupied less conservative rumps but it is good for us, good for our clients and good for the economy. (Keeping the deduction will mean more home sales for those of you who missed it. And more home sales means lots more work for lots more people … yup.)

Resources:
http://www.gop.gov/Committeecentral/bills/hr5970.shtml
http://thomas.loc.gov/ and search for HR5970 with the BILL NUMBER option selected
http://www.bankrate.com/brm/news/mtg/20010601b.asp if you are not familiar with PMI

MSN Money’s Report of the PR Newswire Story