New York State’s Mortgage Credit Certificate (MCC) Program is an alternative way for SONYMA to assist first-time homebuyers. With an MCC, 20% of your annual mortgage interest can be converted into a tax credit and deducted dollar for dollar from your Federal income tax liability. The remaining 80% of mortgage interest continues to qualify as an itemized tax deduction. The credit can be taken to reduce your tax burden every year for the life of the mortgage loan as long as you continue to live in the home. The feasibility of the MCC and the degree to which it can provide housing assistance is totally dependent upon the extent to which you have a Federal tax liability, which can be offset by the MCC tax credit.
For details, click here to read our term sheet for the program.
The benefits of an MCC to a first-time homebuyer can be significant. For example, for a mortgage of $200,000 with an interest rate of 5.5%, the mortgage interest paid in the first year is $10,933. With an MCC, 20% of interest, $2,186, can be converted to a direct tax credit, a savings of $182 per month. Note that the MCC amount will decrease slightly each year as the amount of interest paid decreases. To calculate your potential savings with an MCC, click here.
Federal law prohibits SONYMA from combining MCCs with its own mortgages. However, MCCs can be used with other fixed-rate mortgages that lenders offer, such as:
- Conventional loans (Fannie Mae/Freddie Mac);
- FHA-insured loans;
- VA-guaranteed loans; or
- Other fixed-rate products.
To take advantage of this program, you must file IRS Form 8396 with your Federal tax return for each year.
Mortgagor(s) receiving an MCC can also take advantage of the $8,000 Federal tax credit – which is available for loans closed by November 30, 2009.
All SONYMA Mortgage Credit Certificate Program participants must meet certain Household Income and Purchase Price limits.
How Do I Apply?
To apply for the Mortgage Credit Certificate program you must:
- Contact one of our MCC Participating Lenders; and
- Apply for a Mortgage Credit Certificate at the same time you apply for a mortgage from one of our MCC participating lenders listed above.
- If you are approved for an MCC, you can take a dollar-for-dollar tax credit equal to 20% of your annual mortgage interest costs when you file your Federal income tax return.
- The remaining 80% in annual mortgage interest costs remains tax deductible.
All SONYMA Mortgage Credit Certificate Program participants are subject to the Federal Recapture Tax.
- SONYMA’s Mortgage Credit Certificate Federal Recapture Tax Provisions.