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Is PMI Tax Deductible?
Mortgage Library: Ask a Mortgage Related Question: Answers: Is PMI Tax Deductible?
I understand that PMI is tax deductible with certain lenders. Can you tell me which lenders have this available?
First and foremost consult your accountant or CPA. That by far is the best advice I can give.
Regarding tax deductible PMI it is a myth and a sales tactic if a lender is telling you such, be skeptical get all disclosures and literature regarding it and bring it to your accountant. PMI itself as a month to month payment is not tax deductible, however if you opt for lender paid PMI then it is included in your total monthly mortgage payment and then it is deductible. However keep in mind lender paid PMI comes at a cost and will never go away. Traditional PMI will cancel when the loan is at an 80% value of the home which can take up to 12 years or if the market in your neighborhood is super hot or not after 12 months you can re-appraise and have the PMI removed. Keep in mind historically home values have consistently increased at a rate of 8-9% per year since the 40ís. Some years it may be flat or even go down but generally speaking this is the national trend. So it is very possible to have PMI off within 18 months conservatively.
Back to your original question, PMI is not tax deductible unless the lender is paying it for you. That being the case keep in mind if the lender is paying for something for you they are making money on it and it is usually not in your best interest. If you plan to stay in the home you may want to look into a fixed second and run the numbers for an 80/10 or 80/15 or even an 80/20. In these scenarios there is no PMI
because the first mortgage is at 80% and the second closed simultaneously is a 2nd mortgage which never requires PMI.
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