It can be exciting to see mortgage calculators with much more affordable payments than you could be paying in rent. With the average rent in California estimated at $2,800 by Zillow, home mortgage calculators that show you could buy a townhouse or condo for half this price look appealing. But not all mortgage calculators calculate your true monthly house payment.
Don’t forget property taxes and Mello-Roos
Taxes and fees are often left out of online mortgage calculators. In California, many homes can be eligible for special tax assessment districts called Mello-Roos taxes. These taxes pay for specific improvements to a neighborhood or community.
Some home mortgage loan calculators also leave property taxes off their totals. California’s Proposition 13 sets the base property tax rate at 1%, which means your property tax for the first year you buy and live in your home will be 1% of the purchase price. Local counties can increase their assessment by up to 2% a year. If you make improvements to your property, your property can be reassessed and you’ll receive a new bill from the county assessor.
Homeowners Association Fees
If you’re buying a condo or a single-family home in a planned or gated community, you will have homeowners’ association fees. You’ll also have something called “CC & Rs,” which stands for covenants, conditions, and restrictions. While CC & Rs don’t always add money to your house payment, homeowners’ association dues will be an additional monthly cost for you to add to your monthly payment.
Mortgage insurance and home insurance
Some home loan programs automatically include mortgage insurance in your monthly payment, but online mortgage calculators can miss this amount. Mortgage insurance also doesn’t insure your home and belongings. It is exactly what it says: insurance that will pay the lender in case something happens to you and you can’t make your payments. Homeowners’ insurance is the policy that will pay for damage to your home in case of fire, theft, or storms. In California, some home policies have become very expensive due to the risk of fires. Earthquake policies are always “extra” and may be costly depending on your home’s location.
With rents rising in nearly every California community, buying your home is an attractive financial choice. Just be sure to include all costs when you’re calculating the home you can afford. A qualified mortgage and real estate professional can let you know exactly what your payment will be as you go on your mortgage loan and home buying journey.