Why New Homeowners Fail to Accurately Estimate Their Mortgage Payment
New homeowners agonize over how much they can spend on a home and what monthly mortgage payment they can afford. They consult with their family, friends and perhaps even their financial advisor, real estate agent or lawyer.
However, new homeowners—especially Millennials—often get it wrong and under-estimate their monthly mortgage payment. Why?
The reason is that new homeowners do not accurately estimate how much property taxes they will owe. They rely too much on property tax history and do not accurately estimate how looming increases will affect them – and more increases are in the pipeline as Chicago’s pension crisis is in the beginning stages and the State of Illinois is trying to cut funding to Chicago public schools in the Chicago area.
This blog explains where new homeowners go wrong and what to do about it.
Where New Homeowners Go Wrong
Cook County issues property tax bills every March and July. March’s bill is always 55% of the previous year’s property taxes. The July bill reflects all property tax increases for the year. Your bank estimates these payments and rolls them into your monthly mortgage payment. Banks are not experts in Cook County property taxes, which can lead to unpleasant mortgage payment increases.
If purchasing from an older homeowner, their property taxes may be much less than what you will have to pay because they qualify for exemptions that you do not.
Additionally, if the purchase price you pay for your new home is above the assessor’s market value, then your next property tax bill will likely reflect the increase in market value.
Lastly, if the former homeowner did appeal their taxes every year successfully, on their own or with some help from a third-party like Kensington Research, and you do not, you may pay higher taxes over time and more than your fair share.
The Good News: You May Actually Pay Less than the Former Owner
If the previous owner did not appeal their property taxes or tried doing it themselves, using a non-specialized law firm without a data driven approach or using a fly-by-night online service, there is a good chance we could save you hundreds or thousands per year.
The Best Part: our Free Property Tax Reduction Estimate will identify what we believe you can save – all with over a 90% accuracy rate. This will help give you piece of mind for what you can afford so that you can enjoy your new home instead of agonizing over paying more than expected every month.