How do taxes affect my mortgage?
A few things to consider about property taxes...
Taxes are usually included in your monthly mortgage payments.
This can make a big difference in what you can afford when shopping for a new real estate loan. So, what should we look for when considering purchasing a new home? Lets create a scenario:
Bob and Karen are thinking about moving from Melbourne FL to either Palm Bay or Rockledge. They have found a few homes in neighborhoods they like. The “market value” of the home they currently live in is the same as the “market value” of the homes they are shopping for. This seems easy peasy. Everything should be the same.
NOPE.
There are many factors that will change Everything about what they pay for their current home, vs what they will pay for their new home. Lets focus on TAXES.
There are a few different Taxes that will affect what you pay for your mortgage loan. And each city is different.
The Brevard County Property Appraiser will place an “Assessed Value” on the home you are looking to purchase. This is different than “market value” and “appraised value”. This is the value that you will be taxed on.
Each city will have different Taxes and Fees that will make your tax payments different city-by-city. Consider Palm Bay. They have taxes, and assessments, and bond fees that are unique from other local cities like West Melbourne or Satellite Beach. Based on the “assessed value” of the home you purchase, you might pay more bond fees then other residents, and this could increase your taxes by $500 per year. That’s $50 per month increase, just in bond fees, then their current home in Melbourne.
Bob and Karen pick a cute house they love
Located in Rockledge FL. The neighborhood is peaceful and the location is great. The "market price" for this home is $425,000.
This is the same as their current house. When they sell their house and move into their new home they will have the same payments. Right?
NOPE.
First, payments are calculated by many factors: amount financed, interest rate, length of the loan, taxes, and homeowners insurance. Typically.
Let us assume they purchased their current home for $200,000 eight years ago. The interest rate is the same and the terms of their mortgages will be the same.
Their current taxes will be lower because, the “assessed value” of their current home was set when they purchased it eight years ago. They filed for the Homestead Exemption, as everyone should for their primary residence. This keeps their home taxes locked in with minimal adjustments over the years.
The new house will be “assessed” at a much higher value, since it is being assessed today, within the current market. And the city of Rockledge has different tax rates than Melbourne.
Since mortgage payments are a combination of principle, interest, insurance, and taxes: having a major increase in taxes could have an affect on your payments.
If you are making an upgrade purchase or a downsize move it seems to reason that your payments and scenarios will change. Keep in mind that lateral moves will also impact your payments and loan terms.
This also applies to other actions like a Home Refinance with Cash Out for remodeling. The remodel can cause a “re-assessment” of your property value. This can double your taxes depending on the current real estate market.
Bob and Karen buy the new house and live happily-ever-after.
There are many complex factors in purchasing a new home. They All start with hiring a Mortgage Loan Originator to guide you through the process and find the home loan that fits your needs best.
