PMI Premiums No Longer Deductible
Starting this year, homeowners can no longer write off their private mortgage insurance (PMI) premiums like they have for the past several years. Some type of mortgage insurance is required when a home buyer uses less than a 20% down payment. Mortgage insurance for conventional mortgage loans can be paid two different ways. It can be paid as an additional premium with their monthly mortgage payment. Homebuyers can also choose to use a technique that I’ve recommended for years and that is to use what is called Lender Paid Mortgage Insurance (LPMI for short). W ith LPMI, the borrower pays a one time fee for the mortgage insurance at closing and then there is no monthly premium added to the monthly mortgage payment.
For many purchase transactions, the borrower can possibly negotiate to have the home seller pay the one time LPMI fee so the borrower ends up with a more affordable monthly payment without paying any out of pocket expense. Now that the monthly premium for mortgage insurance is not longer tax deductible, LPMI is looking even more attractive to many home buyers. LPMI is also an attractive option when a borrower is refinancing their home. Using LPMI gives the homeowner lower monthly payments from the first payment and it costs less than using monthly PMI if the borrower stays in the home for more than 3 years. The cost for using LPMI is about the same cost of about 3 years worth of PMI monthly payments. A borrower paying PMI typically has to make those additional monthly payments for about 10 to 14 years.
Larry Saunders
Loan Officer
Mahone Mortgage, LLC
Mobile: (434) 466-5662