Getting a mortgage and understanding all of the components that come with a home purchase is difficult at best. Add mortgage insurance and naturally the "deer in the headlight" look begins to surface.
Having mortgage insurance can be the difference between keeping a roof over your head or ending up having your home repossessed. You may recall the lender asking you whether you wanted mortgage payment protection insurance (known as PMI). Getting the right policy and at the right price can be an invaluable safety net.
The purpose of mortgage insurance is to protect you in the event you are unable to meet your mortgage repayments due to being made involuntarily redundant or due to being unable to work because of sickness sor maybe an accident--at that point PMI will cover your mortgage repayments.
Redundancies can be either voluntary or involuntary. Employees take voluntary redundancy when they agree to leave a post that is being removed from the workplace. In contrast, involuntary redundancy is when the job loss is forced upon the employee.
For individuals with PMI there is great news--the mortgage insurance tax deduction for private mortgages has been extended for another year to help generate more homebuyers. The previous deduction was set to expire but has now been extended.
The deduction lets homeowners deduct all of their mortgage insurance premiums. The amount of a monthly insurance premium will depend on the amount that was borrowed to purchase a home. The following are general guidelines to qualify for the home mortgage insurance deduction:
-Income must be less than $100,000 annually for individuals
-Home must be purchased between January 1, 2007 and December 31, 2010
-If income is more than $100,000 a partial deduction can still be taken
The deduction will help many low income families afford homes and be able to afford insurance as well as by allowing bigger home related deductions than ever before. The average mortgage insurance deduction can save families $200-$400 every year that they own the home. Of course this can add up to significant savings over the years that the home is owned.
New homeowners who have prepaid insurance premiums may also deduct the entire amount. This deduction does not apply to a second home. This deduction only applies to your primary residence.
In addition, to an insurance premium deduction there are other great deductions available for homeowners such as loan origination fees, property taxes and mortgage interest paid. Itemizing a tax return can help homeowners take advantage of all the great deductions.