Real Estate Taxes & Homeowner’s Insurance
Often, first-time home buyers neglect to consider the costs involved in purchasing insurance, and/or how the cost of property taxes will impact their mortgage payments. Likewise, someone selling their first home may not be fully aware of how much of an impact taxes levied on the sale of the home will have on the seller’s net profit.
A first-time buyer may be unaware that the property taxes paid by the seller will most often differ from the property taxes paid by the new owner. Property taxes are based upon the assessed value of the property, and may be higher or lower for the new owner.
When Homestead exemptions are allowed, in accordance with governing state laws, the new homeowner can apply for and receive a tax reduction. In some municipalities a further age-related property tax deduction can be applied for if the home owner is in the sixty-two to sixty-five year old range.
Home Owner’s Insurance
Although a new home buyer may surely be aware of the importance of having adequate homeowners insurance coverage to protect the home against catastrophic damage resulting in a total loss of property, such as from fire, flood, hurricanes, etc., or lesser but major problems within the home, liability coverage and the like, many people still purchase insurance based on cost rather than on the reputation for quality service of a company.
Case in point; in the aftermath of the devastation caused by Hurricane Andrew in South Florida in 1992, some companies –which will remain nameless- refused to pay the full amount of damages incurred by many of these homes by second guessing reputable and reliable contractors. However, some lesser-known and smaller companies accepted the damage claims of reliable contractors and paid in full to repair and often fully restore these homes up to current code.
That is why it is so important to be sure you are covered by an insurance company with a reputation for standing by its customers in time of need. Ask your friends and neighbors about their experiences with their companies, and do some research before you commit to a company which may add to your grief at a difficult time.
Of course other insurance costs may involve title insurance which protects the borrower against ownership challenges, flood insurance (a federal program,) which could be mandatory if the property is located in a flood risk area, and FHA loan required mortgage insurance, which protects the lender against the risk of foreclosure.
A full understanding of all the details involved in buying insurance can save you big dollars. For example, the higher your deductible –the amount of the claim you are personally responsible for – the lower your insurance premium.
At least a 20 per cent down payment on an FHA backed mortgage loan will save the expense of carrying mandatory mortgage insurance coverage. Other arrangements can be made so that the insured can pay a slightly higher interest rate and have the insurance built into the loan. An additional benefit of this arrangement is that it is tax deductible, which the separate mortgage insurance is not.