Friday, December 30, 2011

Payroll Tax Cut Paid for with Higher Mortgage Rates

The Temporary Payroll Tax Cut Continuation Act of 2011 was signed into law earlier this month. At the time it was passed we knew it was going to be financed with higher guaranty fees from Fannie Mae & Freddit Mac. These G-Fees are built into the price or interest rate of a new home loan. Today, Fannie Mae announced that they are raising their G-Fees by 10 basis points (0.1%) beginning April 1.

What this means for those looking to finance the purchase of a home, or refinancing, is that they will pay about 0.1% higher in interest rate than they otherwise would have. Lenders' rates will be impacted a couple months in advance of the April 1 start date.

So a payroll tax cut is paid for by what amounts to a mortgage tax for new homeowners and those that refinance their existing home loans.


  1. It is very important to understand interest rates when working toward home purchase loans. Home purchase loans that give the choice to pay off early usually allow the buyer to save money if the option to pay off early is used.

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  4. Just read this blog, hoping to read more of articles here about this tax deduction. Thanks for sharing.

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