New York Housing Finance : FAQ

Q: What is a mortgage tax credit certificate and how does it work?
Q: How is the mortgage tax credit calculated?
Q: How much can I save with an MCC?
Q: How do I know if I qualify for an MCC?
Q: How do I apply for an MCC?
Q: Can an MCC be combined with other SONYMA mortgage products?
Q: What properties are eligible for an MCC?
Q: Is there a way to estimate how much my actual credit would be?
Q: Can I still use the Federal homebuyer tax credit (up to $8,000) announced as part of the U.S. American Recovery and Reinvestment Act of 2009?
Q: Is a tax credit the same as tax deduction?
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Q: What is a mortgage tax credit certificate and how does it work? A: A mortgage tax credit certificate, known as an MCC, can be used to reduce your household's tax burden every year for the life of your mortgage loan. With an MCC, 20% of what you pay in mortgage interest becomes a tax credit that you can deduct dollar for dollar from your Federal income tax liability. The remaining 80% of your mortgage interest continues to qualify as an itemized tax deduction, as long as you have sufficient Federal tax liability.
Q: How is the mortgage tax credit calculated? A: For example, if you have a $200,000 mortgage and pay 5.5% in interest you would pay $10,933 in interest in the first year of your mortgage. You can claim 20% of the interest, or $2,186, as a direct tax credit. This will free up $183 per month to help you make your loan payments. Keep in mind that each year the amount of interest you pay on the loan will decrease slightly, which means your mortgage credit will be reduced slightly each year.
Q: How much can I save with an MCC? A: Actual savings will vary depending on each borrower's Federal tax situation, but the average homebuyer will likely save about $125 a month - or more than $1,500 a year.
Q: How do I know if I qualify for an MCC? A: To qualify for an MCC, you must meet SONYMA's income limits and the sales price of your prospective home must be within our sales price limits. The limits vary by county, household size and property type. Check income and sales price limits on our web site. To qualify for an MCC, you must also meet one of the following criteria: Be a first-time homebuyer - someone who has not owned or had an ownership interest in his/her principal residence in the last three years, or Purchase a home in a "Target Area", which is an economically distressed area designated by the U.S. Department of Housing and Urban Development (HUD), (download New York State's Target Areas from our web site), or Be a military veteran who has received an honorable discharge. AND Occupy the property you are buying as your primary residence for every year you claim the MCC. If the property ever ceases to be your primary residence, SONYMA may revoke your MCC approval. AND Have received a mortgage commitment from an eligible lender. In addition, your loan must: Be a new mortgage loan. You cannot obtain an MCC if you are refinancing an existing mortgage loan. AND Be a fixed-rate loan - you may choose the fixed-rate loan that best meets your needs.
Q: How do I apply for an MCC? A: SONYMA is making available up to $20 million in MCCs. You can apply for an MCC when you apply for a mortgage loan at any of our participating lenders. To find a participating lender, go to our website by clicking here. Lender's requirements and fees will vary. The lender you choose can help you understand your options.
Q: Can an MCC be combined with other SONYMA mortgage products? A: No. The Internal Revenue Service does not permit SONYMA to issue an MCC for mortgages it funds with mortgage revenue bonds. That means borrowers who obtain a SONYMA mortgage to purchase a home are not eligible for the MCC program.
Q: What properties are eligible for an MCC? A: Eligible properties include one- and two-family homes, condos and co-ops and existing three- and four-family homes. (Two-family new construction must be located in a SONYMA Target Area.)
Q: Is there a way to estimate how much my actual credit would be? A: SONYMA created an MCC Benefits Calculator that is available on our web site, by clicking here. This calculator can help you determine your potential MCC benefit from the information you input.
Q: Can I still use the Federal homebuyer tax credit (up to $8,000) announced as part of the U.S. American Recovery and Reinvestment Act of 2009? A: Yes. If you obtain an MCC, you can take advantage of both the Federal tax credit and the 20% mortgage tax credit offered by the MCC. The Federal tax credit is available for homes closed on or after January 1, 2009 and before June 30, 2010.
Q: Is a tax credit the same as tax deduction? A: No. A tax credit is a dollar-for-dollar reduction in what you would owe in Federal taxes. That means you would owe nothing to the IRS if you owed $2,000 in taxes and were eligible for an MCC of $2,000. On the other hand, a tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume you were in the 15% tax bracket and owed $2,000 in taxes. If you received a $2,000 tax deduction, your tax liability would be reduced by $300 (15% of $2,000), or lowered from $2,000 to $1,700.
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