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The old philosophy was to do piggyback loans as it would avoid mortgage insurance for the borrower, lower their payment (versus the PMI option) and increase their tax deductions as the interest on both mortgage would be deductible.
With the high rate of foreclosures, most banks have severely reduced or eliminated their second mortgage programs as they are unable to collect on them in this declining market value situation, so yes we are having to use PMI on conventional loans if the down payment is less then 20% on a purchase or if the equity is less then 20% on a refinance.
However over a year ago congress has passed legislation that if you purchase a home and have PMI you can in most situations write it off on your taxes through 2010 at which time the legislation would have to be extended by congress (which they have already done once) for that write off to continue.
Note this is only on conventional loans. VA, FHA and USDA Rural Housing have up front mortgage insurance (FHA also has monthly mortgage insurance) and that has not changed.
On Subprime loans, the lender cannot go back and add it on now as the terms of the loan were set at close of escrow. If borrowers on subprime loans go and refinance today they would need to meet the same requirements as anyone else applying for a mortgage and if their equity is less then 20% of the current appraised value on a conventional loan, they would have mortgage insurance.
However over a year ago congress has passed legislation that if you purchase a home and have PMI you can in most situations write it off on your taxes through 2010 at which time the legislation would have to be extended by congress (which they have already done once) for that write off to continue.
Note this is only on conventional loans. VA, FHA and USDA Rural Housing have up front mortgage insurance (FHA also has monthly mortgage insurance) and that has not changed.
What tax breaks do FHA/VA/USDA provide for their insurance? Are they the same as PMI when it comes to tax breaks?
I didn't know it went away. I'm closing on a house shortly and if it weren't for the VA, I'd be paying PMI every month.
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Pmi?
