prepaid interest and can reduce your total mortgage payment. The interest rate on your mortgage typically lowers by 0.25% with each point you buy. If you elect to do this, the fee for the points is tax deductible for the year in which you paid them, assuming the loan you obtained is for your full-time, year-round home (as opposed to a second home or a vacation home). • Mortgage Credit Certification. The Mortgage Credit Certification (MCC) is another program that helps thousands of first-time home buyers secure a tax break. This IRS-based program is aimed at helping lower-income groups afford their first home by essentially subsidizing the loan. The MCC program is designed to help first-time home buyers offset a portion of their mortgage interest on a new mortgage to help them qualify for a loan. Because it’s a tax credit and not a tax deduction, mortgage lenders will often incorporate the estimated amount of the credit (prorated on a monthly basis) as additional income to help the potential borrower qualify for the loan. Depending on the price at which you purchased your home, you can get back up to 30% of the interest you pay as a tax credit. The program is administered by local authorities and can vary according to the state in which you live. To qualify for this tax credit, you’ll need an MCC issued by the local government, which your loan officer may or may not know how to do. • Home improvements. Improving your home will not only add to its livability and comfort, it could also earn you tax deductions in multiple ways. You can use a home improvement loan to finance the cost of improvements on your primary or secondary home which will then likely
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