While many homeowners may have been concerned about the effects that the recently-concluded fiscal cliff negotiations might have on their mortgages, it seems that their fears can be assuaged somewhat.
There was some consternation about the federal government’s plans to potentially eliminate a tax break that saves millions of homeowners a considerable amount of money every year, according to a report from Housing Wire. However, homeowners’ ability to write off the insurance premiums they paid on their mortgage in a given year was reportedly on the table as part of the discussions, and made it through the final bill.
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The ability of taxpayers to deduct their mortgage insurance premium payments is considered a crucial part of homeownership by many experts and lawmakers, and it was believed that eliminating the deduction would serve as a disincentive to those who were considering buying a property, the report said. As such, it might have served as a significant drag on the real estate market as a whole.
Now, though, the law allows for consumers to write off 100 percent of their mortgage premiums as long as they have an average gross income of less than $100,000, the report said.
Further, the deal also extended the terms of the Mortgage Forgiveness Debt Relief Act of 2007, which was likewise set to expire on December 31, 2012, the report said. That allows homeowners who receive principal reductions on their home loans, or go through a short sale, to avoid taxation on the amount forgiven.
“The amount extends up to $2 million of debt forgiven on the homeowner’s principal residence,” Compass Point Research and Trading said, according to the news source. “For homeowners to qualify, their debt must have been used to ‘buy, build, or substantially improve’ their principal residence and be secured by that residence. The law, which was passed in 2007 with a 5-year sunset provision, will now be in effect until January 1, 2014.”
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Many provisions of the fiscal cliff deal will affect consumers’ bottom lines, but experts in the real estate industry hoped that the agreement wouldn’t have a significant negative impact on the housing market, which is still in the nascent stages of its overall recovery.
Image: Roger Schultz, via Flickr
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