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# PMI insurance can cut down tax bill
- URL: https://www.smdp.com/deaths-blamed-on-bloom/
- Published: 2007-05-02T15:00:00.000Z
- Updated: 2026-10-24T23:57:49.000Z
- Author: Kevin Herrera
- Tags: Opinion, Santa Monica, #archive-import

*By Mike Heayn Real Estate 101*

MANY GROUPS LOBBY CONGRESS, BUT few succeed in their causes. One group that did succeed this last year was the mortgage insurance group. Through their efforts, they pushed a tax break through at the last minute. Over the course of the last few years, mortgage insurance companies have felt the pain of borrowers avoiding property mortgage insurance with the development of new loan products. In 2007, homeowners will be able to deduct property mortgage insurance.

Property mortgage insurance, or PMI, is required for borrowers who place less than a 20 percent down payment on a property. The lender has the homeowner purchase the insurance and pay for it monthly in case of default on the loan, in which case the PMI covers the lender. In recent years, borrowers have gotten away without getting PMI due to loan structures known as piggy-back loans. A piggyback loan is where an 80 percent first loan and a 15 percent or 20 percent second equity line or line of credit is placed against the property. By having a second the homeowner can avoid PMI altogether. The downside is that the second is usually a variable rate.

Mortgage insurance can run anywhere from $25 to $500 a month, but usually runs $50 to $100\. The cost of the insurance is based on many variables, however, the most important ones are down payment size and mortgage structure. Although $50 a month seems like a nominal amount, most borrowers are stretching when purchasing a home and another $50 could be difficult to pay.

In December 2006, Congress passed — as part of a last minute tax bill — a mortgage insurance deduction. The downside is that the tax deduction has only been passed for one year, and it is unknown if Congress will extend the deduction into the future. To qualify, joint taxpayer’s incomes must be less than $110,000 or $55,000, if filing separately. If refinancing, the new loan cannot be more than the original loan. All of these are reasonable requirements.

Although the tax break is nice, it does not help the affordability levels in Southern California. Most homeowners are still going to need to get a piggyback loan due to a lack of a down payment. It will be interesting to see if property insurance will be deducted in the future now that PMI is deductible.

The property mortgage insurance tax deduction is a deduction that each prospective homeowner will have to weigh themselves. Even with the deduction, it still may not make sense for a homeowner to get PMI. The one thing to remember about PMI is that it protects the lender and does not serve any real benefit to the homeowner paying it — aside from the new tax deduction. For those homeowners who do get mortgage insurance, we can only hope that Congress extends the deduction into the future.

*Originally published in the Santa Monica Daily Press print edition on May 2, 2007.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/050207.pdf?ref=smdp.com)