New York Plans $20m in Mortgage Tax Credits
If increased affordability and the $8,000 federal tax credit were not enough, first-time homebuyers in New York will have one more incentive to get into the housing market. A state-funded incentive will provide federal tax credits equal to 20% of annual interest costs for the life of a fixed-rate mortgage used to purchase a home in the state. The governor’s office announced the New York State Mortgage Credit Certificate this week and said it will save the average new home buyers $1,500 a year for the first 10 years of a 30-year loan. The credit can be used in conjunction with the federal $8,000 first-time homebuyer tax credit. “The best way to jump-start the housing market is to encourage home purchases by first-time homebuyers,” Governor David Paterson said in a statement. “The New York State Mortgage Credit Certificate will make it easier for first-time homebuyers to buy their first home and will help stimulate the State’s economy. It also means some form of federal tax credit will be available for homebuyers even after the federal government’s tax credit program expires in November.” The state will fund the credit certificate program through an Internal Revenue Service (IRS) regulation that allows the state to trade portions of its bonding authority to fund federal tax credits, avoiding a direct impact on the state budget. Essentially, for every $4 the state could issue in bonds, it will be able to fund $1 in tax credit. The state said it plans to use $80m in volume cap to finance $20m in mortgage credits. There are a number of restrictions on the program. The mortgage must be a fixed-rate loan. Buyers who refinance lose the credit. Mortgage interest can still be an itemized deduction, but only the 80% not covered by the credit. The credit is only available on new loans and lenders will have the program’s applications in early September. The state’s mortgage agency said it expects as many as 700 homebuyers will take advantage of the program by the end of the year. Write to Austin Kilgore.