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Mortgage Credit Certificate Program A Key To Home Ownership Via Tax Savings

Ryan Nakagawa NMLS #395760 Assistant Vice President Loan Manager Honolulu HomeLoans
Ryan Nakagawa
NMLS #395760
Assistant Vice President
Loan Manager
Honolulu HomeLoans

Due to Hawaii’s high cost of housing, the number one question that I receive from first time buyers is whether there are any programs that can help them in purchasing a home. One of the most advantageous programs in Hawaii for these buyers is the Mortgage Credit Certificate (MCC) Program.

For eligible borrowers, a Mortgage Credit Certificate reduces the amount of federal income tax that a borrower pays, and helps to increase the affordability of a new loan. In addition, participating mortgage lenders can factor in these tax savings in the qualification of a borrower, which increases the amount of qualified mortgage. Administered by the Hawaii Housing Finance and Development Corporation, the MCC Program is designed to provide assistance to lowand moderate-income families to afford home ownership.

A borrower with a MCC can claim a dollar-for-dollar tax credit of up to 20 percent of the mortgage interest paid per year. The remaining 80 percent of annual mortgage interest can still qualify for an itemized tax deduction. Most homeowners are allowed to claim an item-ized federal income tax deduction, not a credit.

Here’s an example of the benefits of a MCC:

A mortgage loan of $350,000 at 4.0 percent for 30 years has an estimated annual interest of $14,000.

With a 20 percent MCC Program credit rate, borrowers can claim $2,800 (20 percent of $14,000) in credit on their annual federal tax return.

Borrowers whose income tax liability is $2,800 or greater can receive the full benefit of the MCC tax credit. If the tax credit is more than the amount of a borrower’s tax liability, the unused portion can be used to cover future income tax liability for up to three years.

The remaining 80 percent of mortgage interest, or $11,200 ($14,000 $2,800), qualifies as an itemized income tax deduction.

The savings offered by a MCC can be realized sooner instead of during tax season. Borrowers can fill out a revised W-4 withholding form with their employer to reduce the amount of federal income tax withheld from their paycheck, thereby increasing their take home pay.

What are some of the requirements needed to be eligible for the MCC Program?

• Borrowers must be first-time homebuyers (no ownership interest in a principal residence the past three years).

• The home must be used as a principal residence.

• Borrowers must meet the program’s income and purchase price restrictions.

• Borrowers need to qualify for a new mortgage loan (not a refinance). A MCC will remain in effect for the length of the mortgage as long as the borrower uses the home as a principal residence.

Honolulu HomeLoans is a participating lender in the MCC Program. We are able to offer a MCC in conjunction with conventional, VA, FHA and USDA loans.

To help you save on closing costs, we are currently extending an appraisal credit up to $650 on new purchase loan applications received by July 31, 2015. This promotion is available for a limited time so please contact us for more details and offer restrictions.

Find out how the MCC Program can benefit you, along with our wide range of loan products by scheduling a no-obligation consultation with one of our Loan Officers.

Please contact us at (808) 681-7500 or visit our website, We look forward to assisting you and explaining the loan process.

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