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How do they roll taxes into home loans?
My wife and I are young college graduates, and with the falling housing market, home ownership is looking better and better. We live in NW Wisconsin, where a decent home will cost you $115,000 - My question is this; how does the cost of taxes play into this? The average home tax around here is $1500 - $2,000 / year here. Does this mean that our loan of say $100,000 becomes $160,000 ($2k/yr/30yr)
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| By
Nathan H |
Posted on
06/13/08 Total Answers
4 |
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| Answers- |
| Your taxes to be paid are part of your closing cost. The mortgage company will then add a monthly amount to your payment to pay the taxes next year, and so on. The same holds true for your insurance policy on the house.
Let's say that your taxes are $1800, and your insurance is $600. That's a total of $2400. The bank would add $200 to your payment to cover these amounts for next year, and the next, etc.
Financing $100,000 for 360 months at 6.0% interest, your house payment will be about $600. Then add the taxes and insurance to that. The above scenario would put your payment at about $800 per month.
$600 X 360 = $216,000 total payments for the house.
If you financed $100K for 240 months, the payment would be only $116 more, but it would save you $44,000 over the life of the mortgage.
$716 X 240 = About $172,000
$216,000 - $172,000 = $44,000 savings.
Best wishes, and God bless |
| Answer by :
james m On Date
2008-06-13 19:25:21 |
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| Taxes are rolled into the montly payment. If your monthly payment is 700 per month, with the taxes it would be 825.
Purchase price always stays the same and you always pay taxes, even when your house is paid off, you will still pay the 125 per month. |
| Answer by :
Peilthetraveler On Date
2008-06-13 19:28:55 |
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| Property taxes are typically escrowed for your 1st home loan (and sometimes, but not always, homeowner's insurance). That is not included in estimated home loan quotes (since that can vary depending on total value of home). But it is something to consider when you figure out the monthly payment you can afford.
You should get credit from previous owner for property tax through closing. Property taxes in WI are collected the year after they are from (ie, 2007 taxes are due in 2008). So if you closed on a home June 30 or July 1, 2008, you would not personally pay property tax in 2008, but would get credit for any remaining tax due this year and about half of 2008 property tax due in 2009. That would go into escrow, and escrow payments tacked onto your loan payments would build that up enough to pay taxes next year.
Note that federal deduction for property tax is only for tax you were actually liable for and paid. So you would get no property tax deduction this year and only about half of the 2008 tax due in 2009 (when paid from your escrow minus credit from previous owner).
Home loan interest is deductable (if you itemize) the year you start paying it. But you do not get a deduction for full year property tax until the 2nd full year you own the home.
Other states vary as to whether property taxes are due the same year or following year. So time line for full property tax deductability may vary in other states. |
| Answer by :
efflandt On Date
2008-06-13 20:53:58 |
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| Blah Blah Blah...
The simple answer is - Take you yearly taxes and divide it by 12 (months) -- This is the approximate number you will to add to you mortgage payment (principal and interest) FOR THIS YEAR.
There is no interest on the taxes and it is not added to the loan itself. You are not paying 30 yrs of taxes in advance...PLUS taxes change (go up) all the time, they will not be $2000/yr 2 years from now, let alone 30.
Next year, when taxes go up for argument sake say $300 your mortgage will go up about $25/mo. (300 / 12 = 25) |
| Answer by :
Johnny555 On Date
2008-06-13 23:07:35 |
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