New Home Loan: Don't Forget the Taxes

By Debbie Wilson Columnist

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If you're in the market for a new home loan, remember you'll have to pay taxes. Without reviewing all the costs involved in a mortgage option, what may look good at first glance could turn into something altogether different once all the facts are known.


Real Estate Taxes

With so many new home loan options today, obtaining a mortgage with a down payment of less than 20% can really be quite easy. That said, many lenders will also require your monthly mortgage payment to include an additional amount to cover annual property taxes, homeowner's insurance, and private mortgage insurance. The amount of tax money, commonly called a reserve, is usually dependent upon your total yearly real estate taxes due.

Taxes in Your Mortgage Payment

By adding your real estate tax payment to your monthly mortgage payment, you'll never have to worry about coming up with large sums of money once or twice a year. And because this amount could be anywhere from $1,000 - $5,000 on up, trying to put away such a tax nest egg could prove to be extremely difficult. By having the lender add taxes due to your new home loan upfront, you actually get to pay your real estate taxes in monthly installments, making the big tax bite easier to chew.

If you're ready to embark upon a new home loan, start by looking at a variety of loan options. Be sure to get all the information associated with the cost of the loan, including taxes, private mortgage insurance, and homeowner's insurance. Only then can you compare one mortgage to another and really choose the one that works best for you.

About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.

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