Monday, January 01, 2007

PMI Now Tax Deductible!

Wish this had been in place 10 years ago. For mortgages originating in 2007 or later, Private Mortgage Insurance is now tax deductible! Oh, happy day. This effectively cuts the cost of PMI by a third to a half, dramatically changing the balance between accepting PMI, or taking out a 10% piggyback loan at a high interest rate.

I took the piggyback on my last mortgage, and am paying 8.5% interest (effectively 5% or so after tax deduction) on that piece, and that could go even higher since it's a variable rate. If this had been in effect, I'd probably have gone with the PMI.

Of course, you could avoid all of this with a 20% downpayment, but then you'd lose some of the wonderful power of leverage.