Will Private Mortgage Insurance (PMI) Soon Be Tax Deductible and Better Than A Piggy-Back Mortgage?

A post on Mortgage New Daily entitled "PMI Deduction Buried In The Closing Acts Of Congress" reports that Congress may have passed a bill ammending Section 6050H of the Internal Revenue Code. If this is so and the bill is signed by the President, PMI will be treated as interest and will become tax deductible.

Many consumers have avoided PMI by obtaining a piggy-back mortgage or "2nd trust" for the remaining financing amount over 80% LTV. The interest on the piggy-back mortgage is tax deductible and one of the reasons why the option is so popular.

In speaking with a lender today, if the bill becomes law, it was explained to me that,

• financing less than $400K and going with an 80%+ LTV loan and PMI may be the best option for you.
• financing more than $400K and getting a piggy-back mortgage without PMI may be the best option for you.

Though it hasn’t officially been passed, there’s plenty of discussion going on within the industry already. And we’re sure to see plenty of debate between lenders and mortgage insurance companies on which is better.

We’ll have to see what happens next month when it’s put before the President to sign.

Check with an experienced and reputable lender and tax professional for clarification and to see which loan program is best suited for you.