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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.
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