Tax break largely unused
Routt County has $2.5 million for mortgage credit program
Steamboat Springs — A pool of $2.5 million is available to assist first-time homebuyers in Routt County, but few qualified buyers are tapping into it.
The Colorado Housing and Finance Authority approved the application of the Regional Affordable Living Foundation (RALF) to fund the Routt County Mortgage Credit Certificate program in August.
“Anybody who can qualify for it ought to do it,” Amy Flint of GMAC Mortgage Corp. in Steamboat Springs said. “There’s no downside.”
To date, Flint said she has arranged the benefits of the program for one homebuyer and is working with several other clients who will qualify if they can locate a suitable home.
Jeff Chapman, a mortgage lender with Homebuyers Mortgage, serves on RALF’s board. He hasn’t had a single client fit into the program.
“I think we have to make certain the public knows to ask for it,” Chapman said. “That’s half the battle.”
The fund allows qualified homebuyers to subtract 20 percent of their annual mortgage interest directly from their tax bills. It’s a more powerful deduction than the standard deduction for home mortgage interest, which comes off a taxpayer’s adjusted income on their form 1040.
As an example, Chapman said. Suppose a borrower has a $100,000 loan through this program at 7.5-percent interest. Estimated interest for the first year would be $7,500 (for purposes of simplicity, amortization isn’t factored into this example).Twenty percent of that amount, $1,500, is the eligible tax credit through the MCC program. The remaining 80 percent($6,000) is still eligible for the borrower’s normal Schedule A income tax deduction.
For a mortgage of $150,000 the annual tax reduction would be more like $2,250, and that benefit accrues each year.
The 20-percent deduction can be repeated year after year, based on mortgage interest paid for the current tax year, Chapman said..
The benefit continues until the buyer either sells the property or refinances.
The qualification criteria for the mortgage credit certificate program are straightforward. The income limit for a one or two person household is $54,900. Households of three or more people may make up to $63,135.
The program applies to condominiums and townhomes as well as to single-family homes, Chapman said. The purchase price limit for existing homes is $215,100. For new construction, the limit is increased to $343,800.
The program is also limited to people who have never owned a home before, or haven’t owned a home in the last three years.
Chapman agrees that the lack of activity in Routt County could be partly attributable to people whose incomes exceed the limits or cannot find housing that suits their needs and fits under the limits. But he also thinks there are people who aren’t aware of the housing opportunities that are available.
“Frankly, I believe more people in Routt County can buy a home than think they can,” Flint said.
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