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.