Mortgage - Home Mortgage

Mortgage Rate
Home Mortgage Credit

The phrase home mortgage credit has a number of meanings for the average person. Since there are a number of meanings this phrase can and does confuse homeowners.

The most common use of home mortgage credit is in relation to taxes. In the United States the federal government makes a number of tax credits available to home buyers and home owners.

Every homeowner is allowed to deduct the amount of mortgage interest they pay from their income taxes. This can increase the amount of a person’s tax refund so it can be considered a “credit.”

Other Tax Credits

In recent years the federal government has also made a new homebuyer’s tax credit available. This is a payment of $8,000 the federal government makes to every first time homebuyer in an attempt to increase home sales and stimulate the economy. There is a similar $6,000 tax credit for existing homeowners who want to buy another home.

The homebuyer’s credit is a refundable credit which means the taxpayer gets the whole $8,000 or $6,000 when they take it. The traditional mortgage credit is a nonrefundable credit which means that it simply reduces a person’s tax burden.

There is no guarantee whether the homebuyer’s tax credit will stay around or not. The federal government made it available in 2008 and renewed it for 2009 and changed it. Individuals should consult their realtor, tax professional or mortgage professional to see if they are eligible for these credits.

Another Use of Home Mortgage Credit

Another popular use of the term home mortgage credit is as a description of the amount of equity or credit a person has in their home. Equity is the difference between the value of a home and the amount owed on the mortgage or principal. If the home value is higher than the principal, a homeowner has equity.

Equity can be viewed as credit because it is possible for persons to borrow money against it. Many companies specialize in making home equity loans which are secured by the equity in a home. Home equity can be viewed as a kind of mortgage credit.

More Home Mortgage Credit

The term mortgage credit can also be used to describe the amount of money a person can borrow to purchase a house. This is usually based upon a person’s income and the amount of money they can come up with for a down payment.

A person’s credit score can also affect the amount of home mortgage credit they can get. Those with a higher credit score maybe able to get more home mortgage credit. Those with a lower credit score might get less home mortgage credit.