How Does the Tax Deduction Work for Mortgage on Rental Properties?

by Anil Kumar ~ April 16th 2018

Mortgage protection insurance plans have emerged as the favorites among the homeowners to realize their dream of buying a house of their own. Different companies are turning up with insurance for a different scenario. Along with protecting from losing your home, these insurance plans have other benefits as well. In this article, you will come to know what all benefits they bring and how can you get a tax deduction on rental properties.

What Is Mortgage Insurance?

Basically, these are a contract between the homeowner and the insurance provider where the first pays a fixed premium at regular intervals and the latter promises to keep their mortgage going when they go off work. The offered plan gives you the option to choose a preferred mode of payment and if you are a policyholder, you can choose to pay your premiums every month, every quarter, twice in a year or yearly as well. As their major benefits, mortgage insurance plans cover your while you fall ill, meet an accident or just lose your job, unfortunately. In such scenario, your insurance provider will make your payment and keep your mortgage going.

Why You Need A Mortgage Insurance?

The most crucial thing about a mortgage insurance plan is the consistency of premiums. You are supposed to make the premiums timely every month otherwise it may create a mess. If you skip your mortgage payments, your lender has complete rights in invalid your mortgage contract and that will be a tragedy big enough to handle.

Suppose, you have been paying your mortgage for more than three years and then you miss two consecutive payments. Now at the time of next payment, you come to know that your lender had canceled your mortgage contract and you owe nothing to them. How would you feel? It feels very bad to know that you won’t receive the benefits even after paying for so long. That’s where a mortgage insurance come to rescue. Your insurance plan will help you keep your mortgage life cover going by helping with payments when you need that the most. If you feel you can make your next month’s payment due to some unplanned expenses; you are supposed to inform your lender to avoid any misunderstanding or undesired consequences.

Tax Deduction on Rental Properties

Usually, these plans to help young buyers get a home to their own with the least down payment. But if you are paying a mortgage on your rental property, you can qualify for a tax deduction on the same as well. For example, if you are paying $200 every month on your mortgage, you will be paying $2,400 in 12 months. The good thing is that you become eligible to claim a deduction for the whole amount paid as premiums. That means you claim your yearly tax deduction on the whole payment of $2,400.

Prepaid Premiums

In case of pre-paid premiums, you are supposed to wait till the months passes by. This means if you have the paid the premium of December 2017 in November 2017 itself, you need to wait until the December month passes by and you can file a deduction claim thereafter. Most of the time you get your claim approved when your living on a rented property.

How To Get A Plan Easily?

Nowadays, getting a mortgage plan isn’t that tough how it used to be earlier. Different insurance providers are offering multiple mortgage life insurance quotes for the same. You can receive such quotes by visiting their websites and filling an online form. Different insurance agents will reach you with most suitable plans and you can talk your queries about the same. They will patiently listen to you and will explain each plan carefully. Depending on the benefits and coverage provided, you can choose a plan that provides the most coverage at the least price.

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