Lew Nonnenmocher, RE/MAX on the Coast
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Mortgage Payment Breakdown

Do you want to know what your monthly mortgage payment consists of and how to compute property Taxes in Florida?  Read Below....

There are four main factors that make up the mortgage payment: Principle, Interest, Taxes and Insurance (PITI). There are others, such as Private Mortgage Insurance, FHA insurance premiums, ect, but the majority consists of PITI.

NOTE: There are many great reasons to own your own home or investment property. One of them, is the tax benefits. Taxes and insurance are tax write-offs if you itemize your taxes and if you own investment property, there are many more tax benefits. PMI is one of those payments that has NO tax implication. It is simply a fee you pay a lender so they can purchase insurance should you default on your loan. For the conventional mortgage program, you will pay PMI if you have less than 20% equity in your home. As I mentioned above, there are several other loan programs available that subvert PMI which affords you the ability to finance up to 100% of the purchase price without paying PMI.

Back to the mortgage payment:

PRINCIPLE - The amount deducted each month from the base loan amount. For instance, if you purchase a $300,000 home and $50 goes towards your principle in a given month, your loan balance will be $299,950 after the payment is made that particular month. Principle amount increases each month.

INTEREST - When you borrow money from a lender, they will charge you the prevailing interest rate. Currently around 6%. The interest you pay is based on how much principle remains on your loan. The interest portion of your payment decrease each month proportionally to the increase in your principle increase. Essentially, the amount you pay in principle and interest each and every month will always equal the same dollar amount each month.

TAXES - The county tax portion of your mortgage payment may fluctuate year to year. If you purchase a home at the beginning or end of a given year your taxes will be based on the same amount the prior owner paid that year. Taxes are paid to the county in the rears (essentially you pay at the end of the year). January 1st of the next year after you purchase your home, your taxes will probably increase. Then each year after that, they may increase or decrease based on the county's budget and assigned millage rate. If the home you purchase is your primary home, you will probably designate that home as your "Homestead".

There are may great reasons to homestead your property, but in this context, Homesteaded properties are protected under the "Save our Florida Homes" program. That program stipulates that the county cannot increase the "assessed value" of your home more than 3% per year.

As an example, if say, you purchase a $300,000 home that the previous owner purchase five years ago for $200,000, their taxes will be bases on some figure right around $200,000. January 1st of the year after you purchase your home your taxes will be based on a formula centered on that $300,000 purchase price.

Here is the formula:
Purchase Price: $300,000
County Assessed Value:  $300,000 * 85% = $255,000
Minus Homestead Exemption of $50,000
        Leaves you with a taxable value of: $205,000
Multiply taxable value by the county/city millage rate to get Annual Tax:

Millage Rates by Area:
Escambia County:               .015655
Gulf Breeze:                          .0152663
Gulf Breeze Proper:             .0157663

Pace:                                     .0138663
City of Pensacola:                .01942

 In our example: $205,000*.017963= $3682 in annual taxes
Divide that number by 12 to get your monthly tax amount applied to your mortgage. In this case: $306.83

INSURANCE: To accurately determine what your annual homeowner's insurance bill will be I highly suggest contacting your insurance company prior to submitting an offer on your home or investment property. These days, this figure could vary significantly from company to company and area to area. It certainly pays to shop around. Divide that annual insurance bill by 12 to determine your monthly amount due for insurance each month.

Another thing to keep in mind, unless you pay cash for your home, chances are your monthly insurance and tax payment will be collected by your lender and deposited into your "escrow" account. Then each year (November for taxes and the anniversary of your home purchase for insurance) your mortgage company will pay your tax and insurance bills to the appropriate company.

I hope this helps....Please let me know how I can assist you. Remember we'll represent you, always look out for your best interests, and always provide you with the information you need to make knowledgeable decisions. One last note...Obviously books have been written on information above. This was only intended to give you a brief overview. When you're ready, we can sit down and discuss details of any questions you may have. Or just drop me an email or give me a call.  I'd be glad to walk you through it.

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