Effective January 1, 2007 Private Mortgage Insurance (PMI) became tax-deductible for home loans originated after January 1, 2007. When a consumer does not have a 20% down payment, PMI is a requirement for most home loans. According to a SMR Research study for mortgage loans in 2005, approximately 50% of all home buyers would have been impacted by this new law. "Piggyback" loans where a home buyer obtained two mortgages were a creative alternative to paying PMI. "Piggyback" loans are when the consumer gets a loan for 80% of the purchase price (first mortgage) and obtains a second mortgage for the down payment ( usually 10-20% of the purchase price) This loan had been popular over the past few years especially from 2001 - 2005 when the prime lending rate was under 5.5%. Consumers who chose the Home Equity Line of Credit (HELOC) mortgage are now paying more than they would have if they had chosen PMI. HELOC's are typically tied to the prime lending rate and are a variable rate program. Over the past 6 months, we have seen an increase in consumers trying to refinance their mortgages to consolidate their first and second mortgage. This new law will benefit these consumers as well as new home buyers.

Consult your personal tax advisor to determine whether or not you are eligible for this tax-deduction.