Mortgage Insurance Tax

As a homeowner, you know how important it is to make sure you can make your mortgage payments each month, but have you ever considered what you would do if you unexpectedly lost your job as so many have in recent days? If you are one of the many people who would be unable to continue making payments for six months or more, you should consider implementing a safety net to protect you from losing your home if you become unemployed. One of the best decisions you can make is to purchase unemployment mortgage insurance.

Facts on Mortgage Insurance Tax

If you paid less than twenty percent of your home’s value as your initial down payment, you most likely already pay private mortgage insurance, or PMI. PMI is intended to protect the lender from loss in the event that a borrower must default on his loan. It also allows buyers to purchase homes with smaller down payments. If you currently pay PMI and your home loan originated in the year 2007 or later, you may be eligible for mortgage insurance tax benefits. If you don’t pay PMI and you don’t have an emergency fund that could cover six months’ worth of expenses in the event of job loss, you should consider purchasing your own unemployment mortgage insurance plan so that your home will be protected from foreclosure.

Mortgage Insurance Tax Deductions

Only recently have home buyers been able to deduct private mortgage insurance payments from their taxes. The law changed in order to facilitate home ownership for lower income families, and allows buyers who make less than $100,000 per household to receive mortgage insurance tax deductions on their PMI payments until the year 2010. Only homes purchased in 2007 or later are eligible for the tax breaks.

Mortgage Insurance Tax and Your Home

While mortgage insurance tax breaks are a great help to those who qualify, you should consider purchasing unemployment mortgage insurance even if you aren’t eligible for the tax benefits. Only a small percentage of Americans have large enough savings in their emergency funds to cover household bills and expenses for more than a month or two if they were to lose their income. If you’re among those who don’t, you could lose your home quickly if a pink slip showed up on your desk. Unemployment mortgage insurance will pay your house payment for up to six months while you search for employment. Depending on the policy, you may receive enough to pay principal only or you may receive coverage for interest and taxes as well. Union members should also find out whether the policy they are considering offers benefits in the event of a strike. Some policies will also cover you for disability or illness while others won’t. Each policy is different, so make sure you read all contingencies before you decide on a company.

When you’re ready to purchase an insurance policy, shop around at several different companies in order to ensure that you’re getting the best deal on a policy that meets your family’s needs. Keep in mind that you’ll most likely need to hold the policy for at least six months before the company will allow you to make a claim, so if you know you’re likely to lose your job soon, purchasing a policy probably won’t cover you.

Whether you’re paying PMI or choosing to purchase insurance for peace of mind, mortgage insurance tax breaks are only one of the many reasons you should maintain unemployment mortgage insurance on your home. Taking the initiative to protect yourself now could be the decision that allows you to keep your home in the future.