President Bush has signed a tax bill that creates a deduction for mortgage insurance premiums that is designed to help homebuyers in 2007 but could also benefit owners who refinance.The MI deduction becomes effective Jan. 1, and it allows homebuyers with incomes up to $100,000 to take a full deduction for the premiums they pay during 2007. It is understood that homeowners who refinance in 2007 can take an MI deduction, but it has to be based on the original amount paid for the house. "Mortgage insurance has long provided a safe and smart way for families to afford a home," MGIC president Patrick Sinks said. "With this new deduction, it becomes all the more sensible at a time when both interest rates and housing costs are on the rise." The MI deduction is good for only one year, but MGIC and the other MI companies expect Congress to extend it next year. One industry source said consumer disclosures should warn that there is some legislative uncertainty involved.

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