New Homebuyer FYI #4

New Homebuyer FYI #4
by Hassan Nicholás

• Supplemental Tax - Most home buyers are unaware of or don’t understand supplemental property tax, but if you’re not prepared it could be quite a payment shock. The tax is an additional tax beyond the normal annual tax you would pay for any increase in the value of the property as determined by the assessor. For a home buyer, this means any increase of value from the former assessed value, an addition of a room onto the house, a new pool and any other major improvements will be included. The tax, which is billed separately, reflects the tax on the difference in the new value of the property versus the old value. Tax rate can range between 1% to 1.2% depending on area code, meaning on a property whose value increased by $100,000 a buyer could expect to pay a supplemental tax of $1,000 to $1,200. The tax payer (you, the buyer) will receive the supplemental tax bill many months after purchasing the home. The bill is split it in two halves, the first of which arrives with a no-penalty deadline for 30 days and then four months thereafter to pay the second half. Because the tax is supposed to capture the current value of the property you will only receive a supplemental tax once. And any reduction in value will result in a refund of taxes paid or taxes owing.

• Maintenance Costs - If you're only planning for PITI (principal, interest, taxes and insurance) then you're playing with the risk of getting into unexpected debt. Maintenance costs is definitely one of the "hidden" costs of homeownership, so if you're in the market to purchase a single-family home you must plan for it. Some experts recommend saving 1% of the purchase price for annual maintenance. Divide that percentage by twelve and it will tell you how much you should be setting aside monthly. And while we're at it, you had be saving for furnishings as well. After all, you don't want to live in a house with an empty living room.