House Payment: What's Included In A Typical Monthly Mortgage Payment?


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If you are considering purchasing a home or refinancingyou can go to quickenloans.com or lendingtree.com along with local mortgage lenders in your areato determine what loan will best suit youand your family.  You can compare closing costs, APR's and Par rates to determine what loan will best serve yourand your family's long-term interests.


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A Monthly Mortgage Statement Normally Include:


Principal

Interest

Taxes

Insurance

PMI/MIP or Private Mortgage Insurance/Mortgage Insurance Premium

HOA (Home Owners Assocation) Dues




All monthly housing payments consist of a principal and/or interest portion in the payment.




In the early years of a 30 year loan the payments are primarily interestwith only a modest reduction in principal (loan balance). 



Principal payments have the effect of reducing the loan amount or balance on the loan.


Interest is payment for the cost to borrow. If you have a 30 year loan you would pay more in interest than that of a 15 year loan.


Home Interest, property taxes, PMI/MIP and points are deductible on your tax return.


If you obtain a 15 year loan you will pay less in interest over the life of the loan. The balance on the loan will decrease a lot faster.


However, it is a better choice in my opinion if you are in financial position to utilize this type of loan.


The shorter interest deduction period will be more than offset by you having true ownership in a shorter period of time. 


Private Mortgage Insurance & Mortgage Insurance Premium



If your payment to your lender has an “escrow” feature you could also pay your taxes, insurance and depending on the type of loan you havePMI for conventional loanor MIP for an FHA loan into the escrow fund. MIP is also sometimes called an FHA Premium.


PMI/MIP is a premium (additional charge) that lenders require on loans where the purchaser puts less than 20% down on the property to help reduce risk for the lender.


However, once the loan reaches 80% of the purchase value of the property you can request to have it removed. Likewise if you reach the half way point of a 15 or 30 year loan it should be automatically removed if you are current on your loan.


Other Terms and conditions may apply so always check with your particular lender and/or reference your closing paperwork and lending documents.




Property Taxes & Insurance




The property taxes and insurance portion of the escrow fund usually accumulates over a period of months and when your tax bill and insurance premium becomes due money is pulled from the escrow fund to make the payments.


The escrow fund will usually always have a positive running balance.  It is usually analyzed on a regular basis and/or when there is a deficiencyand if there is a shortage or deficiency (not enough money in the account) you will normally get a letter stating that your escrow account will be increasing.




Some lenders give you the option of paying the escrow shortage in one lump sum in order to keep your payment at the current level.




If you decide not to pay, your lender will increase your monthly escrow payment and therefore your monthly housing payment would increase.


In some cases your escrow balance may have an overage or surplus (too much money in the account) or amount above the cushion or reserve required and if that was the case your mortgage lender would send you a check for the overage or escrow surplus.


The lender normally will try to reach a “target balance” plus a slight cushion when forecasting the proper escrow account balance.




Changes in your millage rate, increases or decreases in your hazard insurance premium and/or your Fair Market Value, a special assessment tax bill can all lead to your escrow changing.




The property taxes are assessed at 40% in Georgia.


To estimate your monthly real estate tax payment quickly if you plan on purchasing in the metropolitan Atlanta area multiply your expected purchase price by 40 percent.


Deduct from this amount your homestead exemption (you must file for the exemption the year after purchase from January through March or Aprildepending on what County you move to) using the following figures as a starting pointfor more accurate and up to date exemption and millage amounts contact the tax commissioners office in the County in which you plan to move.


The deadline for filing for your homestead exemption after purchasing your home for the following metro Atlanta Counties are April 1st, unless otherwise noted. 




Clayton $10,000

Cherokee $9,000

Cobb $10,000

Dekalb $20,000Deadline March 1st

DouglasCall Tax Commissioner

Fayette $9,000Deadline March 1st770-461-3652

Forsyth $8,000

Fulton $30,000Atlanta $10,000404-612-6440

Gwinnett $23,000

HallCall Tax Commissioner

Henry $23,000

PauldingCall Tax Commissioner770-443-7606

Rockdale $12,000


Multiply the assessed value minus the homestead exemption amount by the millage rate in affect in the area you want to move to.


In metro Atlanta the rate ranges from the mid twenties to the mid forties.


Divide the figure you come up with by 1000 to get the annual tax figure. Divide by 12 to calculate your estimated monthly property tax.





How To Calculate Your Property Taxes?




Quick Example: You buy a $300,000 dollar house in Fulton County.




In the city (Atlanta) where the house is located the millage rate is 39.91.


The assessed value at 40% is $120,000. 120,000 minus $40,000 homestead exemption equals 80,000.


80,000*39.91/1000 = 3192.80


3192.80/12 = 266.07 per month in property taxes.


Normally each city within the County have their own tax mill rate due to varying needs and operational capabilities of a particular city.


If the property is located in an unincorporated (non-city area) area of the County the services are normally lower and so is the mill rate.




On a typical property tax statement you will see the following:




State Tax PortionTo Fund State Government


County (M&O) Maintenance & OperationsTo Fund County Operations


County Sales Tax CreditOften Used To Reduce The Millage Rate For Home Owners


County School M&OTo Fund School Operations


County School BondUsed To Fund Specific Projects


City PortionUsed To Fund City Operations


City Sales Tax CreditOften Used To Reduce The Millage Rate For Home Owners


City BondUsed To Fund Specific Projects




For example:


You purchase a home for $180,000 and the home is assessed at 40%.


Your Net Assessment would be $72,000.




By just purchasing the property you would not be entitled to any exemptions such as the homestead exemption or exemption for the elderly because you were not an owner occupant on January 1st. 




For sake of discussion lets assume you are in year 3 of home ownership and you timely filed for your homestead exemption in January of the year following the purchase of your home.



Because you frequent this site often you are aware that as an owner occupant you are entitled to a homestead exemption by filing for it from January or February of the year after purchase at your County Tax office.




If you had a $2,000 State Tax Exemption your Taxable Value would be $70,000. ($180,000 * 40% minus $2,000 equals $70,000)


If you had a $5,000 County M&O Exemption your Taxable Value would be $67,000. ($180,000 * 40% minus $5,000 equals $67,000) 


If you had a $2,000 County School M&O Exemption your Taxable Value would be $70,000. ($180,000 * 40% minus $2,000 equals $70,000)


The other portion of the tax bill not affected by an exemption would be assessed at the net assessment of $72,000 which would also be the Taxable Value.


Sometimes the State, County, and Cities in Georgia will offer credits from sales tax collections to offset or reduce the effective millage rate. By doing so, your taxes would be lower.




The State of Georgia recently (2009) decided to eliminate the Homeowners Tax Relief Grants (HTRG) that had been available to homeowners since 1999.


The grant resulted in a saving of $200 to $300 for the average homeowner so you would possibly see an increase in your taxes unless your current fair market value decreased.




The credit is normally in the form of a millage rate reduction and will be displayed on your tax bill.


The millage rate is a taxing formula (1 mill equals 1/10 of a percent) used by state, county, and local governments to help them run and perform various government functions. The rate is usually devised by state legislators, county commissioners, school boards and city councils.


Lets Say Your Mill Rate Is As Follows:


State Tax $70,000* .250/1000 = 17.47

County M&O $67,000*7.321/1000 = 490.51

County Sales Tax Credit $72,000* -1.921/1000 = (138.31)

County School M&O $70,000* 20.00/1000 = 1400

County School Bond $72,000*1.650/1000 = 118.80

City $72,000*9.893/1000 = 712.30

City Sales Tax Credit $72,000*3.509/1000 = (252.65)

City Bond $72,000*.399/1000 = 28.73




Total Mills 34.083




Total Mills Before Reduction 39.51




Total Credits in Dollar Amount (138.31) plus (252.65) = ($390.96)




Gross Tax 17.47 + 490.51 + 1400 + 118.80 + 712.30 + 28.73 = $2767.81




Net Tax 2767.81 minus 390.96 = $2376.85





In Georgia you will normally receive a “Notice Of Assessment” from the County Board Of Assessors Office outlining your previous fair market value, your current fair market value and your 40% Assessed Value.


Assessed Value times 2.5 equals potential Fair Market Value (72,000*2.5 = $180,000).



Appeal Rights



You have the right to appeal if you feel the values that were determined were too high or too low. You must do so within 45 days of receiving the “Notice Of Assessment” or your right to file an appeal will be lost.


You must appeal the values to the County Board of Assessors, either followed by an appeal to the Board of Equalization or to Arbitration and in either case, to Superior Court.


The due date for property taxes in Georgia is normally from August through November and they vary based on which County you live in. 


Exemptions Available To Owner Occupants In Georgia:




If you plan on filing for a homestead exemption do it before March 1st to be safe. In some Counties you must file before April 1st.



Regular Homestead Exemption

Local Exemption

Double HomesteadMust be age 65 on January 1st

Floating Homestead ExemptionAge 62 and up

50% School Tax ExemptionMust be age 65 on January 1st or Totally Disabled

Total School Tax ExemptionMust be age 65 on January 1st or Totally Disabled Income Limits Apply

Veterans ExemptionMust be 100% disabled, service connected

Senior ExemptionAge 62-65 on January 1st




The tax rates are set each year by the following authorities:



State Tax and Bonds set by the State of Georgia

County Tax and Bonds set by Board of Commissioners

School Tax and Bonds set by County Board of Education

City Tax and Bonds set by Mayor and City Council



Insurance



If you are obtaining financing on your home the lender will require that you purchase and maintain hazard insurance for the term of your loan or until payoff whichever comes first.


In Georgia expect to pay about $300 per $100,000 of house. For example on a $300,000 house expect to pay about $900 but rates can change based on market conditions and the insurer that you choose as well as your credit profile.


The real cost however, will depend on the area you move to, your credit rating, your local fire department rating, the particular insurance company you choose and other factors.


Use the above figure as a guide only as your particular rate will be determined by your individual and family situation. 


Bonds



Bonds are issued by State, County and Local government to fund major projects. Standard & Poors, Fitch and Moody's rate bonds.


The highest rating for Standard & Poors is AAA and the highest rating for Moody's is Aaa. There are only a few cities in Georgia that have a rating of AAA.


In order to get such a high rating your city normally must have a built out economy, very strong wealth and income levels, a large and diverse property tax base, consistently positive operating results, moderate debt levels, healthy reserves and strong financial management.


There are only a few cities in Georgia with an AAA rating and those that I am aware of are Peachtree City, Alpharetta and Suwannee.



Stormwater Fees



Some Counties and/or Cities have what are called "Stormwater" Fees that are included on the tax bill or are separately billed.


The fees are based on the impervious area of water runnoff on your property such as roofs, driveways and other areas that create runnoff.


There are cities in Gwinnett and Fayette Counties in the metro Atlanta area that I am aware of that have stormwater fees with many others considering the fee as a way to improve services and keep their community solvent. 



Home Owner Association Fees



Some communities have what are called (HOA) Home Owner Association Dues or Fees. They may in many cases be included in your monthly payment. If you live or purchase in a community that has HOA fees you will have to budget for them.


HOA fees are generally $400-$500 annually in many communities. Although it really depends on the amenities in your community as some communities have monthly fees of several hundred dollars.


The HOA fees are usually for community amenities such as the swim/tennis area, club house, walking trails, community lake and the like. In luxury condo and more extravagant communities the HOA fee can easily get into the thousands on an annual basis. 



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