Is Up Front PMI tax deductible?

[crabu2]

Ok... I'm in the middle of a refi and my appraisal came back short.

 

For me to do this refi, I now have to either pay off the 2nd mortgage, subordinate the 2nd (which I hear is almost impossible these days, unless I do a Harp loan or go with the same lender for the 1st mort, that's holding the 2nd), or get PMI. I'm leaning towards PMI.

 

I've got the cash to pay off the 2nd mortgage, but I'm thinking I should just do PMI... I haven't heard back from my loan officer, but from my research, it looks like my PMI would around $70 a month or $2100 upfront.... I could also go to closing with $15K in cash to get me to 80% too.. I don't want to empty my bank account, but I hate the idea of monthly PMI, so I'm thinking I should just pay the upfront PMI.

 

The question is, is upfront PMI tax deductible like monthly PMI is? If it's tax deductible, I'm thinking of paying it upfront, assuming it comes in around $2000.

 

What are your thoughts on this, especially about the tax deductibility, ssuming my numbers are accurate?

 

BTW, when I calculated my monthly PMI, my figure .... based on calculations I found online, were about double the $70. The $2100 upfront and $70 was given to me by a loan officer, based on the numbers I provided.... I gave him my mid FICO, current appraisal, and what I was looking to borrow.

 

 

[road2freedom]

Maybe this is just me... but I have a hard time paying interest unnecessarily, let alone insurance on top of that. What is the rate of return on that cash you are holding?

 

Edit: And to answer your question, Up Front PMI is typically deductible, but keep an eye out for changes as they seem to happen frequently.

Edited May 17, 2013 by road2freedom

[crabu2]

The rate of return, on the cash I'm holding, is almost nothing, but this was cash I was saving to purchase a new truck.. And because my employer is eliminating telecommunting, I will soon have to drive 65 miles to the office.... So if at all possible, I'd like to hold on to the cash, because it's looking like I will need a new super fuel efficient car....

[road2freedom]

Well, with the right deal, the rate on a new car/truck is less than what you will likely see with a mortgage (depending on your credit), so I would still rather not pay PMI and finance a vehicle at a cost less than it would be to finance that same amount in a mortgage.

[crabu2]

Well, with the right deal, the rate on a new car/truck is less than what you will likely see with a mortgage (depending on your credit), so I would still rather not pay PMI and finance a vehicle at a cost less than it would be to finance that same amount in a mortgage.

 

Normally, I would agree with you, but a car payment of $400+ is harder to make than adding less then $50 to the monthly mortgage payment....

 

I don't know... I'm still thinking about just using my car cash towards the house, but I know I need a new car. My current car has 150K miles and with the amount of driving I'm getting ready to do, I'm not sure how long it will last.

[road2freedom]

 

Well, with the right deal, the rate on a new car/truck is less than what you will likely see with a mortgage (depending on your credit), so I would still rather not pay PMI and finance a vehicle at a cost less than it would be to finance that same amount in a mortgage.

 

Normally, I would agree with you, but a car payment of $400+ is harder to make than adding less then $50 to the monthly mortgage payment....

 

I don't know... I'm still thinking about just using my car cash towards the house, but I know I need a new car. My current car has 150K miles and with the amount of driving I'm getting ready to do, I'm not sure how long it will last.

 

No worries and yeah , you have to do what you can afford. Just keep in mind that 15k on a mortgage could cost you 10k in interest in the long run and that's before considering the PMI. If payment is what you are after though, I completely understand.