How Property Taxes Impact Your Home’s Purchase

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Lots of people are always asking me, “How exactly do property taxes of a home I’m going to be purchasing affect me and my monthly payment?” Basically, your bank will collect 1/12 of the property taxes within your mortgage payment once you close on your new home. This can affect you in several ways.

First, they can determine how much the bank gives you for your mortgage. When the bank is approving you for a mortgage, they determine how much they’re willing to lend you per month, which has to include principal and interest (the actual mortgage payment), 1/12 of your taxes, and 1/12 of your homeowner’s insurance.

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Property taxes determine your buying power and your mortgage rate.

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Here on Long Island, where the taxes are typically above $6,000 and somewhere below $15,000, they also have a huge impact on your buying power. What do I mean by that? Let’s just assume that the bank approves you for a mortgage of $300,000, with taxes of $10,000 a year. That equates to a monthly number we won’t discuss here. However, if you were to find a home with a tax of $8,800 a year instead of $10,000, that would equate to $1,200 a month less, which would give you an additional $100 a month to spend on your mortgage payment. $100 a month on today’s interest rates is approximately $20,000 more you can spend on a home!

So, property taxes also determine your buying power. When you’re searching with your Realtor, make sure that you pay attention to the property taxes because that definitely affects how much you can spend on your home.

If you’re searching for a home or know someone who is, please contact me by phone or email.

Don’t Let Rising Rents Trap You on Long Island

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Want to buy a home? Search all homes for sale.

Rent prices continue to rise in New Jersey. If you’re not careful you could become trapped in a cycle where you cannot save enough money to put towards a home purchase. Rent rates rise every year, but when you lock in a 30-year loan, your monthly payment stays the same.

The average landlord raises the rental payment 3% per year. That doesn’t seem like a lot, but when you rent for an extended period of time, you’re throwing away so much money. If rental units are in low demand, prices can rise as much as 20% per year. For example, in 2006 my friend had a 2-bedroom rental that cost $1,250 per month. That same property now costs more than $2,000 per month. That’s a 75% increase in 10 years!

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Stop putting money into another person’s savings.

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When you pay rent, you are essentially throwing away money. When you pay your mortgage, you’re basically putting that money into savings. Renting does not allow you to build wealth, and you could spend hundreds of thousands of dollars over the course of 30 years. Wouldn’t you rather have that money in your bank account, rather than someone else’s?

If you’d like to learn more about the benefits of homeownership, please don't hesitate to contact me!