The veritable nightmare of dealing with mortgage calculations and insurance estimates can lead to poor financial decisions happening and a customer even losing their desired home because they didn’t crunch the numbers right the first time.
However, it doesn’t have to be like this. Indeed, there are plenty of ways to ease up the estimating process, but they aren’t readily apparent. So what options are there?
Well, you’ve come to the right place. It’s time to delve into the top 10 facts that no one told you about how to estimate taxes and insurance on a home!
But enough preamble, right? Let’s break these steps down…
How to Estimate Taxes and Insurance on a Home
1. Research is Vital
One of the first steps you can take to estimate your home taxes is to take a look into the tax history of the property you plan to live in. Here’s how to find out what the taxes are- with most homes, the Realtor can check public records and the data in the MLS to find out what the current property taxes are. With new construction, the builder will be able to give a rough estimate of the taxes prior to settlement, and the township will assess the property post-settlement for fully accurate property tax information
But what if your new residence was only recently constructed? Cases like these will require you to look at homes of similar value and their taxes to get a rough estimate of what your mortgage taxes will look like.
2. Taxes in Flux
Another tip that’s important to remember is that the taxes paid on houses at the beginning won’t always stay the same. One example of when this will occur happens if residents make any large-scale renovations to their house (like adding an extra room). This ups the property value of the house, and the taxes will increase with it. If the municipality requires that the home is then reassessed. Any questions about tax assessment should be directed to the municipality in which you live or plan to live.
Keeping track of massive changes in the housing market is a good idea too, as these can also have a serious impact on your property taxes. Various changes in legal policy have also thrown the value of property taxes into flux.
3. Property Taxes Are Only the Beginning
When calculating one’s taxes, make sure to factor in the bonus taxes that are slapped on. For example, there are individual taxes people have to pay to both the state and county. School taxes are also common depending on the location of a residence. Which reminds us…
4. Location is Key
Researching the tax programs of the area one plans to live in can also prove beneficial. For example, Philadelphia started a tax abatement program that helps remove the cost of property taxes on a new home, giving homeowners more leeway when it comes to finances.
Another important factor to find out is how the state calculates property tax with respect to your home’s value. Some states will use the market value (the net worth of the property) while some will only use a percentage of that value. This will allow homeowners to achieve a better understanding of what their tax outcome looks like.
5. Math Time
Once a homeowner learns the value their house is viewed at for state taxations (known as assessed value), they need to multiply that number by the tax rate imposed by their state. This value will provide them with an estimation of how much they will pay in property taxes.
However, for those who would rather saw off their foot than do math equations, many websites offer a mortgage payment calculator that does the work themselves based on the variables they receive.
6. But What About Empty Land?
If someone owns land that has no property built onto it, they need to take into account that they still have to pay property taxes on the land. While the value will tend to be lower (since there is no built property there), the value can spike if the land is in a high-demand area (think beaches).
7. Determine the Portions of Insurance
Now that taxes are taken care of, it’s time to deal with insurance. One of the first steps to take here is deciding what insurance plan to take. Mortgage companies will require most customers to buy the baseline homeowner’s insurance (to protect their investment).
However, it is up to the individual customer to decide if they take any extra add-ons. One example includes the electrical or mechanical breakdown cover, which helps protect any electrical appliances that break down. One can also purchase add-ons to protect individual possessions like jewelry.
8. Debate the Deductibles
Another important key to finding out someone’s insurance payments is deciding what deductible they have (or the value they pay before the insurance company pays for something that’s damaged). They will pay less on premiums if they nab a large deductible, but incur more of the financial burden if tragedy strikes.
Like mortgage tax payments, insurance companies will also inflict extra payments on those with bad credit, so be sure to factor that in.
9. 2x the Score
In addition to maintaining a good credit score, home insurance buyers should also keep in mind that there is a separate “insurance score” they need to keep track of as well. Keeping on top of insurance payments and out of legal trouble will prevent the insurance companies from viewing you as a liability and buffing your payments.
10. Factor After Factor
Finally, make sure that every potential factor that affects insurance costs is accounted and prepared for. These can range anywhere from how many people are living in a single property to the property’s proximity to various locales like a firehouse or body of water. Even small details like the type of pet someone owns or the presence of a wood-burning stove can cause costs to shift.
Master of Calculations
Now that all the steps for figuring out how to estimate taxes and insurance on a home are out in the open, what’s the next step? Well, consider reaching out to us folks here at Tri-County Team 2000. Whether it’s through online forms or mail, getting real estate advice and listing in the greater Philadelphia area has never been easier!