Property Taxes and Its Impact on How Much Home You Can Buy

Before my girlfriend and I took the “leap” and jumped right into searching for our first home to buy, I was impervious to the joys of property taxes and its huge impact on the amount of home you can buy. From my initial conversation with my mortgage advisor Stephen Kulisek, I learned that upward shifts in the purchase price of a home have minimal impacts on what my monthly payment would be versus seemingly small shifts up in property taxes.

While I’m about the furthest thing from a mathematician,  conventional wisdom has it that a $50K increase (in a home’s purchase price) would be more impactful on my finances than a $5K increase (in taxes). 50 > 5 after all, isn’t it? Well, the reason why this can be wrong and fly against typical math is that an increase in the cost I’m paying for a home is spread out over the life of my mortgage (usually 30 years) while what you pay in property taxes is a cost incurred every year and usually paid monthly.

I’ve crunched some numbers on our Coldwell Banker Mortgage calculator to get a really quick and dirty look at how property taxes impact the amount of home you can buy. Let’s take a look.

House A
Listing Price: $259,000 with 10% down and a 3.5% interest rate
Property Taxes: $8,000
Annual Insurance: $720
Annual Condo Association Fees: $3,600

Estimated Monthly Payment: $2,195

House B
Listing Price: $298,000 with 10% down and a 3.5% interest rate
Property Taxes: $2,536
Annual Insurance: $720
Annual Condo Association Fees: $3,336

Estimated Monthly Payment: $1,893

So for these two real listings I’ve found on coldwellbanker.com, I could conceivably end up purchasing a $39,000 more expensive home and still end up saving over $300 a month, which amounts to over $100K over the life of a 30 year mortgage. This isn’t exact science, and things get even muddier if you’re purchasing a single family home and aren’t burdened by condo fees, but clearly working hand in hand with your Realtor and a mortgage professional is a pivotal part of navigating this whole homebuying process and getting your dream home at a price you’re comfortable with.

Coldwell Banker Home Loans Mortgage Advisor Stephen Kulisek puts this into much better perspective for us:

“In this market every $10,000 borrowed may cost you only about $45 per month on a 30 year fixed mortgage while every $1,000 in real estate taxes per year will cost you about $83 per month. This means that from town-to-town and in some cases even street-to-street your Buying Power can change by almost $20,000 with every $1,000 spent on real estate taxes. Wow is right! This could mean the difference between that $380,000 home or the $400,000 home just a few miles away. The same logic applies to the requirement of monthly flood insurance in certain areas or mandatory homeowners association dues. So remember, Buying Power all comes down your total monthly housing payment and knowing the facts, staying informed, and doing your research are the keys to success in this home shopping season.”

Real Estate Headlines for the End of April

So long April showers. Hello May flowers. Pretty soon you’ll be inundated with graduation invitations and start feeling the need to plan your summer vacation. But before you can do any of that, be a good boy or girl and read your weekly real estate headlines:

An entire block is for sale near downtown Minneapolis. Oddly enough it’s being listed on Craigslist.

Just so you know, congress is mulling over changing taxes on residential real estate.

Sunday was American author Harper Lee’s birthday. Here’s a look at possibly the most feared home in American Literature, The Radley House from To Kill A Mockingbird.

US News & World Report has an infographic that tries to decode who exactly is the first-time homebuyer in today’s day and age.

Talk about getting in on the real estate market early, Ariel Winter, who plays Alex Dunphy on Modern Family, at the age of 15 just bought a home with her sister.

For the minimalists, here are 11 terrifically tiny homes.

So you want to buy a million dollar home? AOL Real Estate has 5 tips for you.

What should you be looking for when you want to a buy a fixer-upper?

And finally, North America’s tallest wood building is set to break ground in Vancouver. (image above)

 

Image courtesy of MGA

 

Real Estate Headlines for the Week Prior to Tax Day

Tax Day Cometh

The eggs have been found and there’s probably some discount candy available in your local supermarket. So while the baseball season gets through its first full week and you scramble to finish up your taxes, here are some real estate headlines to keep you on the pulse:

 

Photo courtesy of Flickr user bradleygee