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Mortgage Credit Certificate News

Posted on February 11, 2010 by Ray Williams (NMLS #216267).

Are you aware of the refinance or purchase opportunity using the Mortgage Credit Certificate (MCC)? This credit is separate from the first time home buyer tax credit. For a refinance you must currently have an adjustable rate mortgage, you closed on, between 1/1/2002-12/31/2007. To use this tax credit when financing your home you must work with an approved MCC lender. Here is an example of how it works:

Here is an example for a client who just bought a condo at $128,500~

Ok, so the breakdown for the MCC aspect is like this:

Mortgage: $125,681

Rate: 5.125% (A.P.R 5.755%)

Annual interest: $6441.15 (125,681 * .05125)

MCC is 20% credit of that annual interest: $1,288.23 (6441.15 * .20)

$1,288.23 / 12 (months) = $107.35 (per month)

The $107.35 per month represents how much your MCC benefits you on a monthly basis. So you can adjust your W4 to increase your withholding number. You will want to increase the number so you have $107.35 less of total federal income tax taken out of your check per month.

At the end of the year you will need to fill out the IRS FORM 8396. This is where the IRS knows (applies) you are to receive the tax credit towards your filing.
For more information consult an MCC approved lender. This STATEWIDE program is limited to available funds, so make sure to ask your professional if they can offer this to you or visit http://www.milehigh.com/housing/for-sale/mcc-program

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