Mortgage Credit Certificate also known as MCC

How will a MCC assist my home purchase?

The federal government allows each homeowner to claim an itemized federal income tax deduction for the amount of interest paid each year on a mortgage loan. For a homeowner with a MCC, this benefit is even better: 20% of your annual mortgage interest will be a direct federal tax credit, resulting in a dollar-for-dollar reduction of your annual federal income tax liability. The remaining 80% of your annual mortgage interest will continue to qualify as an itemized tax deduction. The amount of your mortgage credit depends on the amount of interest you pay on your mortgage loan. However, the amount of your mortgage credit cannot exceed the amount of your annual federal income tax liability. Unused mortgage credit can be carried forward for three years to offset future income tax liability.

What are the requirements?

The MCC requirements include the following:

• The home you buy must be used as your principal residence after you obtain your mortgage. If it stops being your principal residence, your MCC will be automatically revoked and you will no longer be entitled to claim the mortgage credit.
• You cannot have an ownership interest in a principal residence at any time in the last three years.
• The mortgage loan must be a new loan. You cannot be issued a MCC for the acquisition, replacement or refinancing of an existing mortgage loan. However, you may (on a case-by-case basis) be issued a MCC for the replacement of construction period loans, bridge loans, or similar financing of a temporary nature with a term of twenty-four months or less.
• The federal government considers the MCC tax credit to be a subsidy. As such, you may be subject to federal “recapture tax” if (1) you sell your home within nine years of purchase, (2) you sell your home at a gain, and (3) your income increases above a specified level.
• A $25 Application Fee and a fee of $400 will be charged for the processing of your MCC application. Loans must be closed within 90 days of issuance of a MCC Conditional Commitment. The MCC Conditional Commitment may be extended for 60 days subject to a $100 fee. Please contact a MCC Participating Lender to learn more about MCC Program requirements.

For more information, you can read the Mortgage Credit Certificate (MCC) brochure and see a list of all the participating lenders.