PMI Insurance: 41 percent increase

Down the road, the mortgage insurance will go away," when there is sufficient equity in the home. " And then the mortgage payments will be less than having the piggyback payment."

To that end, borrowers who expect to be in a home for several years might want to consider mortgage insurance on a primary loan as opposed to taking out a piggyback loan.

"I tell my clients, mortgage insurance is not a forever thing," said Cryer.

In the first 10 months of the year, about 1.7 million new private mortgage insurance policies were issued, a 41 percent increase from the same period a year ago, according to the Mortgage Insurance Companies.

"The deductibility feature for both government and private mortgage insurance has made insured loans more attractive,". "It's a lot harder to get those more exotic loans given the nature of the market."

The deduction is more likely to help moderate-income borrowers save on their taxes when buying lower-priced homes, said Cryer, the mortgage broker.

Three out of four California homeowners and 88 percent of homeowners nationwide who have purchased mortgage insurance through Walnut Creek-based PMI Group Inc. meet the income criteria for taking the mortgage insurance deduction.

The Bay Area's higher housing prices can result in much higher premiums, along with the potential for higher tax savings.

"It will reduce your taxes," said Bruce at San Ramon-based Armanino McKenna, LLP. "There's no reason not to take it."

While there is clearly a tax advantage, Coblentz pointed out in today's stricter lending environment, borrowers who could afford a median-priced home are more likely to have higher incomes that would disqualify them for the tax break. "With real estate prices so high here in the Bay Area, this will not help a lot of potential home buyers. The (income) limit is too low," he said in an e-mail.