October 27th, 2015 9:24 AM by Jackie A. Graves, President
One of the biggest breaks
homebuyers get with a fixed-rate mortgage is the escape from ever-escalating
rents or adjustable rate increases. But that sigh of relief can be short-lived
when you get your next property tax assessment or hazard insurance renewal.
you buy a home with a fixed-rate mortgage, lenders require a year's
worth of escrows in advance. These are included in your closing costs which can
also be rolled into your loan, if you've got the wiggle room to borrow a little
Hazard insurance is required by lenders to protect their investment. How much
coverage you get is up to you, but you have to get at least enough to repay
your liens. While it costs more, you should get your home insured for
replacement value because that's the true cost of restoration.
year's worth of insurance will be escrowed to the lender who services the loan,
including paying your premiums. Once the first year goes by, the monthly cost
of your premium is escrowed. From year to year, the cost of
insurance can change drastically, due to natural disasters or changes in
coverage. If there's been major flooding in your state, you insurance may
decline to pay any claims related to water damage, even if the flooding was
caused by an appliance. You'll have to get a rider, which costs extra.
monthly payments can also rise from increases in property taxes. You should
expect this because the rate you pay your first year is based on what the
previous owner paid. The seller pays the taxes due up to the day of closing,
and you take over for the remainder of that year's assessment.
new assessment will be based on the market value of your home which you
established when you purchased the home. Most city and county laws have
formulas for how much your taxes can increase year-over-year. This prevents
sticker shock. You'll also have plenty of advance warning as the taxing
authorities will send you an assessment at least six months ahead of any annual
always challenge your tax assessments, but you'll need proof such as market
comparables from your real estate professional. Taxing authorities use the same
local multiple listing service as your agent, so expect them to have the same
data you have.
rate mortgage can offer you some financial stability, but you'll be even more
stable if you're prepared for monthly costs in the future.
Written by Blanche Evans – To view
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