Congress Eyes Revival of Mortgage Insurance Premium Deduction to Boost Affordability

A bipartisan group in the U.S. Congress is advocating for the revival and expansion of the mortgage insurance premium (MIP) tax deduction, which expired in 2021. This legislation, titled the Middle Class Mortgage Insurance Premium Act, aims to provide financial relief to homeowners who incur mortgage insurance costs due to down payments under 20%.

Mortgage insurance premiums can significantly increase monthly housing expenses, particularly for first-time and lower-down-payment buyers, often ranging from $30 to $70 per month for every $100,000 borrowed. The reinstated and enhanced deduction could reduce the annual insurance cost for eligible homeowners by an average of around $1,454, making homeownership more affordable amid current housing market challenges.

The bill is supported by bipartisan lawmakers and nine co-sponsors, reflecting a growing legislative focus on housing affordability and reform. Previous efforts to permanently reinstate the deduction have not succeeded, but the current political and economic climate may improve its chances of passage. The legislation aligns with broader housing reform initiatives, such as the Neighborhood Homes Investment Act, and if enacted, could provide significant tax savings, possibly affecting buyers' ability to qualify for homes or manage monthly housing costs more effectively. Industry professionals and stakeholders should monitor this development closely as it holds potential implications for consumer demand, market dynamics, and regulatory frameworks in the mortgage insurance sector.