New mortgage insurance tax break for 2007 homebuyers

There is good news for people looking to buy a home this year: Mortgage insurance is now tax deductible. The new deduction will provide an average savings of $200-$400 for new homebuyers seeking safer forms of low down payment financing than "piggyback" mortgages and other creative loans, where monthly payments can skyrocket when interest rates adjust.

For the past few years, low monthly mortgage payments on interest-only and adjustable-rate loans have put previously unaffordable homes within reach for many homebuyers. Now, as shortterm interest rates reset from historical lows, rising monthly payments are creating a growing wave of foreclosures.

"Too many people have gambled with the one thing they shouldn't risk-their homes," said Kevin Schneider, president of Genworth Financial's U.S. mortgage insurance business. "Insured loans are one of the most affordable and safest ways to buy a home, and this new tax break makes it an even better deal."

Mortgage insurance helps buyers who can't make a 20 percent down payment become homeowners sooner. While piggyback mortgages do the same by combining two mortgage loans, the second loan usually carries a higher and potentially adjustable interest rate. Mortgage insurance allows buyers to remain secure in the knowledge that their monthly payment will not change.

According to mortgage expert Holden Lewis at Bankrate.com, the "bottom line for consumers is, don't get a piggyback loan without taking a serious look at mortgage insurance, because mortgage insurance is likely to be cheaper in the long run, and it might even cost less in the short run."

Mortgage insurance premiums are fully tax deductible for households with an adjusted gross income of $100,000, phasing out as the income rises to $109,000. To learn more, visit www.smartermi.com.