Jacksonville Real Estate & Homes  
Jacksonville ARTICLES

New Tax Law In Effect
Author: Lucas Jones
Source: Homes Discovered
Date: December 20, 2006
President Bush recently signed into law a new tax bill that is worth $40 billion dollars and extends certain tax breaks and adds a new one.  The new tax break makes private mortgage insurance (PMI) tax-deductible.  This break is only available to those homeowners with adjusted gross income that is less than $110,000.  This new law really helps those potential home buyers who have little to no down payment for a home.

Most mortgage brokers require buyers who cannot put 20% down on the home to purchase PMI because buyers are more likely to walk away from the loan when they have less of their own money wrapped up in the transaction.  Lenders use PMI to protect their own interests.  The alternative to PMI is an equity loan piggybacked onto the first mortgage.

For the last several years interest rates on equity loans have been severly low and that has encouraged buyers to use piggyback loans as an alternative to PMI.  Piggybacks became much cheaper than PMI because of the low rates combined with the loan interest being tax deductible.  Now that rates have risen and this new tax break going into effect it is a much smarter move to go with the PMI.
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