How do Property Taxes Affect your Monthly Payment?
Home buying is a process that accompanies a wide range of calculations and considerations. When calculating their affordability and monthly payments, many home buyers overlook a crucial payment: property taxes.
Property taxes are a part of the monthly housing budget and it is important to calculate them when you are planning your budget for a home purchase. They are an additional cost that many people overlook, and they can often be greater than your estimates.
In the home buying process, property taxes are one of the factor that can make a huge difference to your monthly payment. Property taxes vary on from state to city and so on. They can be extremely high in certain areas and low in some others.
When you’re planning to buy a home, account for the property taxes in your area as part of your housing budget. It is important to save yourself this surprise as property taxes can become a significant expense. As per industry trends, property taxes continue to increase by hefty amounts, and they can increase your monthly payments by a significant amount.
Property Taxes & Housing Budget
The total cost of attaining home ownership is impact by a wide range of factors aside from your mortgage payments, principal and interest rates. These factors include property taxes, utility bills, and your maintenance and upkeep expenses. While the principal and interest rates in a conventional loan are not subjected to change, your property taxes are likely to increase.
Your property taxes depend on the area where you want to buy a house. Some areas tend to boost extremely high property taxes, while some areas, such as Florida, Alabama, Wyoming, South Carolina and others, tend to offer major concessions on property taxes.
Property taxes can greatly vary from one state, city, township or village to another. It is crucial to consider the taxes on every single home that you consider investing in. This will help you understand how the property taxes will affect your monthly home ownership payments.
In terms of simple calculations, if your property taxes amount to $1200 annually, it will add $100 to your monthly payments. If the property taxes amount to $12,000 annually, it will add $1000 to your monthly payments. It is important to note that each property has its own taxable value and unique property taxes.
Understanding Property Taxes
When you’re shopping for houses and mortgages, it is important to keep your property tax calculations in mind. It is highly recommended to compare different mortgage lenders and examine their rates and offerings.
You can provide your banker your property information and valuations in order to obtain accurate information about your property taxes. This expense can then be added to your overall loan estimations. As per the legal bindings, a lender will have to provide you a loan estimate within three days after you submit your application. This allows you to understand the impact of your property taxes on your monthly payments, and your total cost of home ownership throughout the lifespan of your mortgage.
The most important factor to understand about property taxes is that they are subjected to change. Even after obtaining a loan estimate and your total cost of home ownership, you have to understand that the property tax expense will not remain stagnant throughout the lifespan of your home loan.
The general trend of property taxes continues to increase the expense, and this will increase your monthly payments and your total cost of homeownership. Property taxes increase for a wide range of reasons, including a new county administration, public officials who seek to increase taxation, or a bid to raise revenues for public schools or other government-funded programs.
When you’re shopping around for homes, be sure to conduct research on the area, and examine its history of property taxation increments and reductions. Observe all the trends in property tax hikes, and look for any state legislation that increases or decreases property taxes. These trends will help you understand the nature of property taxation in your chosen area and how much the property taxes could be increased.
Shopping for Property Taxes
Homeowners are largely recommended to choose to invest for homeownerships in tax-friendly states and cities. This helps them achieve the home ownership security without having to be crippled under the financial burdens that come with home ownership.
If you’re buying with the assistance of a real estate agent, they will provide you a property datasheet that contains information of the area specifications and dimensions of the property. This datasheet will also contain information about the structure of the property, the property taxes and the school district of the area.
However, it is important to note that the property tax rates you see may not be the ones that you get. Your effective property tax rate will be the current tax rate, and there are multiple exemptions and discounts that can be availed. For instance, senior discounts, owner-occupants, veteran exemptions, public servants and more. We strongly advise you to get detailed information about all the tax exemptions and special programs for homeowners in your area.
Nothing is more heartbreaking than finding your dream home and then not be able to afford it due miscalculations in your property tax payments. If you are not eligible for any tax exemptions, just be sure not the underestimate your monthly tax calculations based on the property tax rates you see on the datasheet.
Many homeowners in various states and counties can qualify for discounted property tax rates. It is important to obtain information for the various discounts, programs and tax exemptions for different homeowners. If you are eligible for any tax exemption or discount, it can help reduce your overall homeownership cost and increase your affordability.
The home buying process can indeed be challenging and overwhelming, especially given all the financial calculations and burdensome expenses. However, it is important to be super diligent about receiving accurate information and figures. This will help you avoid miscalculations and explore avenues to reduce your financial burdens.