Most online mortgage calculators can tell you what your monthly mortgage payment will be based on your purchase price, downpayment and projected interest rates. However, there are several other monthly costs you need to factor in, that can have major impacts on your purchasing power:
Interest Rates: As of this writing, interest rates in our area are averaging 5.029% for a 30-year, fixed-rate mortgage. We all know this won’t last forever — the Mortgage Bankers Association predicts rates will rise by about 1% by the end of the year, primarily due to the Fed ending its purchase of mortgage-backed securities. With higher rates, not only will you ultimately pay more over the life of the loan, but your monthly payment will also increase, thereby reducing your purchasing power. Say, for example, you are taking out a $400,000 mortgage: your monthly payment at 5% is $2147, but if you buy at a rate of 6%, your monthly payment will be $2398 — that 1% difference in interest will cost you $250 a month!
Your Downpayment Amount: If your downpayment will be less than 20% of the purchase price of your home, you will be paying an additional monthly private mortgage insurance (PMI) premium on top of your mortgage amount. The costs for PMI vary, but generally run between 0.5 – 1% of the loan amount. For example, if you buy a $300,000 house with a downpayment of $30,000, or 10% of the purchase price, you will have to obtain PMI on your $270,000 mortgage, at a cost of somewhere in the range of $112 – $225 a month.
Property Taxes: With a residential rate of 7.72%, our property taxes in Cambridge are a relative bargain, especially once you deduct the ~ $1500 residential exemption. Somerville’s rate is quite a bit higher at 12.3%, though this is moderated by the ~ $1700 residential exemption. As a point of comparison, Boston’s tax rate is 10.63%, Brookline’s is 10.69%, and Watertown’s is 12.24% (these towns all also offer a residential exemption). Arlington’s tax rate is 11.92% and there is NO residential exemption.
HOA Fees: If you’re purchasing a condo, the amount of your monthly Home Owners Association (HOA) fee can have a big impact on your total monthly housing payment. While some smaller condo associations, for example in a 2/3 family house, may have fees as low as $150 a month, you can pay upwards of $400 a month in larger, professionally managed buildings.