“That myth around a 20% down payment is the number one myth or falsehood that is out there in people’s minds, preventing them from becoming a homeowner,” Hurst said.
Mortgage insurance tax deductible again
While the full effects of President Trump’s Big Beautiful Bill are still to be seen, one major change that would benefit those not putting 20% down on a mortgage is the ability to deduct mortgage insurance from taxes again.
“Between 2007 and 2021, mortgage insurance was, in fact, tax deductible,” Hurst said. “Many people took advantage of it. However, because Congress couldn’t get together, that law was temporary, and it fell off the books in 2021. The good news is, as of last month, as part of the Big Beautiful Bill, mortgage insurance tax deductibility became permanent.”
According to the US Mortgage Insurers (USMI), during the previous period where deductions were allowed, it was claimed 44 million times, with 4 million homeowners using it each year. The average deduction was $1,454 per qualified taxpayer.Hurst told brokers to remind potential homebuyers that mortgage insurance on a loan is not permanent. It must be removed automatically when the loan reaches 78% of the loan-to-value (LTV) of the original value.
Borrowers can also request it to be removed once the LTV has reached 80% of the original amount. Certain lenders and loan investors, including Fannie Mae and Freddie Mac, have their own mortgage insurance cancellation rules.