A certificate from a state or local housing agency that lets a homebuyer claim a federal tax credit for 10% to 50% of the mortgage interest paid each year, capped at $2,000 when the rate is above 20%. It has to be issued at or before closing.
An MCC turns part of your mortgage interest into a tax credit, which comes straight off your federal income tax instead of lowering your taxable income. You claim it on IRS Form 8396 every year you live in the home and pay interest on the certified loan; any part your tax can't absorb carries forward three years. Few state agencies still issue them, and selling within nine years at a gain can trigger a recapture tax.
Estimate the income-tax savings from deducting your mortgage interest and property tax.
Estimate your monthly principal-and-interest payment and see a full amortization schedule for any home loan.
Compare your current loan to a refinance: new payment, closing costs and the break-even point.