What is PMI?
PMI, or private mortgage insurance, is often looked upon as an enemy- an unnecessary fee that many of us in the housing market are forced to pay, with no other option. PMI inherently receives a bad reputation, but I believe that education is key- and PMI can be our new friend, especially during tax season!
Starting at square one as a potential buyer, we are contemplating how to buy a home, which REALTOR to choose, and of course a location to buy a house! Many of the terms that a buyer comes across in the process can be confusing, and working with a great REALTOR is essential. Often times we are the only individuals to which buyers can ask the important questions!
PMI is actually a great tool for buyers, especially buyers that simply cannot put down 20% for a down payment. The PMI is in place so that buyers can purchase a home, without a full 20% down- Yet lenders are still comfortable with the transaction because a safety net is put into place. Once a certain amount of equity is reached, the homeowner cancels the PMI and no longer has to insure their mortgage privately.
Why are you going to love PMI?
A homeowner is able to use the PMI premiums as a deduction on itemized tax filings! PMI premiums can be deducted in the same year that they are paid, future payments would be deducted on corresponding years. It is important to note that if questions arise, it is best to consult a tax professional. Some limitations do exist, but as a general rule your PMI premium can be your next tax deduction.