New York State yesterday rolled out a mortgage tax credit for first-time home buyers, a federal income tax deduction that can be taken each year they pay interest on the loan.
The program, called the Mortgage Credit Certificate, would allow home buyers to take a dollar-for-dollar deduction of 20 percent of mortgage interest paid, Gov. David A. Paterson and other state officials announced. The remaining 80 percent of the mortgage interest paid for the year will be treated as usual, as itemized tax deductions.
The average homeowner can save about $1,520 per year for the first 10 years, officials said, and as many as 700 borrowers might be able to take the deductions this year.
The state's mortgage tax credit comes on top of the federal tax credit of up to $8,000 for qualifying, first-time home buyers, defined by both programs as those who have not owned a home for at least three years. But unlike the new mortgage tax credit, the federal home buyer's tax credit is scheduled to expire at the end of November.
"The best way to jump-start the housing market is to encourage home purchases by first-time home buyers," Paterson said. "The New York State Mortgage Credit Certificate will make it easier for first-time home buyers 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 home buyers even after the federal government's tax credit program expires in November."
The mortgage must be a fixed rate, and home buyers apply for the credit at participating lenders. So far, Wells Fargo, Bank of America, M&T Bank and Continental Home Loans in Melville have signed up, but state officials expect more.
Continental's chief executive, Michael McHugh, said he hopes the incentive will help undecided house hunters realize it's the "best time . . . in history" to buy.
"If you are considering buying a house, when you see the tax advantages given, I think it makes home ownership affordable in an already affordable market," he said.
There are also income and purchase price requirements, depending on the county. For Long Island, the income limit for a household of up to two people is $122,160, and for a family of three or more, it is $142,520. For single-family homes, the purchase price must be below $637,640 or $779,340 if the house is in a "target" area, parts of communities or even streets designated as economically deprived.
The program will be run by the State of New York Mortgage Agency. Its chief executive, Priscilla Almodovar, touted the credit as a boon to working families. "Offering a federal tax credit is a powerful incentive to bring first-time home buyers into the market, and it helps with a family's cash-flow needs. This program will help stabilize housing prices."