Mortgage Credit Certificate A Mortgage Credit Certificate (MCC) is a tax credit that entitles qualified homebuyers to reduce the amount of their federal income tax liability by an amount equal to a portion of the interest paid during the year on a home mortgage. This tax credit allows the buyer to qualify more easily for a loan by increasing his effective income. If the amount of the MCC exceeds the homebuyer’s tax liability, the unused portion of the credit can be carried forward to the next three years or until used, whichever comes first.
With the Brevard County Housing Finance Authority MCC Program, a homebuyer can claim a tax credit equal to 50% of the interest paid on the home mortgage during the year, up to $2,000. Since the homebuyer’s tax liability is reduced by the amount of the credit, his effective income increases by that same amount. The homebuyer uses the remaining interest paid as a tax deduction. When underwriting the loan, a lender considers this increased income and the borrower is able to qualify for a larger loan than would otherwise be possible.
The following EXAMPLE illustrate how a MCC makes a difference:
Let’s say you purchase a home and take out a mortgage for $120,000 at a 3.875% interest rate. Part of your monthly payment on that mortgage will repay principal owed and the rest will repay interest. At the end of the first year, you will have paid $4,612 in interest. When you file your income taxes, if you itemize deductions, you will get a deduction for the interest you paid. For the purpose of this example, say your total tax bill after the deduction would be approximately $2,300.
With a MCC, you have the same $120,000 mortgage at the same 3.875% interest rate. At the end of the first year, you are going to have paid the same $4,612 in interest. However, when you file your taxes you will receive a tax credit (a deduction of your tax liability) of 50% (up to $2,000) of the $4,612 you paid in interest, and you can use the other 50% of the interest you paid as a tax deduction. Keeping with this example, your total tax bill would be approximately $2,800, but when you deduct the $2,000 of your MCC, you would only have to pay $800.
| No MCC | With MCC | |
| Mortgage Loan Amount | $120,000 | $120,000 |
| Interest Rate | 3.875% | 3.875% |
| Annual Interest Paid (1st year) | $4,612 | $4,612 |
| Tax Bill | $2,300 | $800 |
More MCC Benefits 
You don’t have to wait until the end of the year to receive the benefit of the MCC. You can file a revised W-4 withholding form with your employer to reduce the amount of federal income tax withheld from your wages and increase your take home pay by up to $167 per month.
A MCC can also help a lender more easily qualify you for a mortgage. With a $120,000, 30-year mortgage at a 3.875% interest rate, your monthly payment would be $564 – you would need to earn $24,184 a year to qualify for the mortgage. If you have a MCC and revise your W-4, you could take the extra money (up to $167 a month) and put it towards your mortgage payment thus reducing it. A lower mortgage payment means less income needed to qualify for the same mortgage.
| No MCC | With MCC | |
| Mortgage Loan Amount | $120,000 | $120,000 |
| Interest Rate | 3.875% | 3.875% |
| Monthly Mortgage | $564 | $564 |
| MCC Rate | 0% | 50% |
| Monthly Mortgage Payment | $564 | $398 |
| Annual Income Needed to Qualify | $24,184 | $17,041 |
| Annual income needed to qualify is based on monthly mortgage payment not exceeding 28% of monthly income. | ||
“The above information is for illustration purposes only. Homebuyers should consult with their lenders directly to determine the specific benefits of the MCC.”