Tax Benefits and Basics of Mortgage Credit Certificates

One big area many people think about during a mortgage application and homebuying situation is the tax implications, and with good reason. Mortgages often come with notable tax-related areas, whether we’re talking about future write-offs or other potential benefits.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to explain any tax ramifications to you for any of our loan programs or mortgage refinance options. One possible item that may be available through certain special housing assistance programs is known as a mortgage credit certificate – what is this, how can you qualify for one, and what tax benefits might you be able to glean from it? Let’s take a look.

Mortgage Credit Certificate Basics and Qualifications

As we noted, mortgage credit certificates are sold through special mortgage programs. They offer potential tax breaks and exemptions, which we’ll go over in just a moment.

While the requirements to qualify for a mortgage credit certificate vary between states, most states have a basic set of standards here:

  • Maximum mortgage amounts (houses worth over a certain threshold will not qualify)
  • Limitations on total household income
  • No previous homeownership within the last three years before applying

Benefits of Mortgage Credit Certificates

The primary benefit of a mortgage credit certificate is a direct tax break that can be applied at the end of each fiscal year during the mortgage. If you qualify, you can claim deductions based on the taxes for your income – and you can do this every year during the mortgage, not just the year the mortgage closes during. Many people use this theme to build up savings and put that money toward the loan principal, lowering the balance and total interest paid over the course of the loan.

In addition, some states also include special exemptions with mortgage credit certificates. They may allow you to take up to 25 percent of your mortgage interest away in one shot, rather than using this as a credit deduction.

Requirement Waiving Circumstances

In some rare cases, the IRS and state governments can combine to waive some of the requirements we listed above, including income limits, housing values and others. This is generally only done during major periods of financial crisis, however, or when the housing market is slow and needs a new infusion. As those who have their ear to the ground in terms of real estate will be aware, this means that it’s currently tough to get an exception here – home values are high and the market is doing very well, meaning this sort of waiving is unlikely.

For more on mortgage credit certificates, or to learn about any of our other mortgage loan programs, speak to the staff at Altius Mortgage today.

Primary Benefits of Homeownership Compared to Renting

At Altius Mortgage and our partners at Mortgage Ogden, we know the jump to homeownership for those who have previously rented for their living situation can be a big one. This is true in several areas, from the financial commitment you’re making to the responsibilities you’re taking on by owning your own home.

For first-time buyers considering this leap, however, it’s important to take stock of the numerous benefits potentially associated with homeownership – a few of which are greater than you might have thought. Let’s look at several factors, both financial and otherwise, that make owning a home an attractive option compared to continuing to rent.

Viable Investment

For starters, those looking to begin investing in their future have few options better than owning a home. Real estate is considered one of the single safest investments out there – home values virtually always go up over a period of years into the future.

If you’ve been renting in the same area for several years, one you know you’re comfortable in, it pays to investigate purchasing a home in this area instead. Rather than paying into someone else’s mortgage and building their investment, you can get started on your own and begin benefitting yourself in the long-term.

Credit Boost

Provided you take on the right mortgage, one you can pay back properly and within the required timelines, owning a home also serves as a great way to build your credit. Every time you make successful mortgage payments, it reflects that much more positively on your overall credit profile.

After enough time, your mortgage will provide a big boost in an area known as length of credit history, which is a huge factor in calculating credit score. These years of successful payments will provide proof to future lenders that you’re trustworthy.

Personal Ownership

Owning a home isn’t just beneficial for financial reasons – it’s also a big positive for many personal areas as well, namely making the space and property your own. When renting, there are several limitations on your ability to design and improve as you see fit; you generally can’t make major structural changes or even change paint and color schemes.

When you own a home, however, these kinds of areas are fully up to you. You can prioritize the elements of your lifestyle you care most about while keeping yourself and your family happy.

Community

Finally, renters tend to have a more difficult time establishing a community and long-term relationships with their neighbors. Many rental homes are near other such homes, meaning residents in this area will commonly come and go, often not staying longer than a year or two. When you own a home, however, you can begin to form lasting connections with other homeowners in your area, connections that often end up valuable in the long run.

For more on why owning a home holds several distinct benefits over renting, or to learn about any of our home loan services, speak to the staff at Altius Mortgage today.