New Mortgage Tax Law Changes

Two new changes to the mortgage tax laws could save new homeowners and those facing foreclosure thousands in taxes.

Congress has recently made two very important tax law changes that have a dramatic significance to homeowners across the nation.

The first change benefits those who purchase a home but do not have the required 20 percent down payment to avoid Private Mortgage Insurance, also known as PMI. PMI is insures lenders get their money back in case the homeowners are unable to keep up with their mortgage payments and enter into foreclosure. The tax law change now makes PMI tax deductible which reduces the after tax cost of buying a home.

The second change benefits those who have been unable to keep up with their mortgage payments and have faced losing their home to a foreclosure or short sale. It use to be that, if a lender could not sell the property to satisfy the full debt of the mortgage owed on the property the homeowner in default would be liable for taxes on the unpaid balance. This tax law change now waives any tax penalties from January 2007 until December 2009 on any primary residences that enter into foreclosure or short sale.

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