HRE - Home Insurance and Taxes Lesson
Home Insurance and Taxes
Introduction
Similar to owning a vehicle, houses also come with additional fees and payments to consider. Two of the major ones are real estate taxes and home insurance. These are usually calculated as annual charges but added to your monthly mortgage payment. It helps that they are not separate payments, but this can definitely increase how much you will have to pay each month for your house!
Real Estate Taxes
Homeowners will have to pay city or county real estate taxes. The amount paid depends on the assessed value of the property as well as the tax rate. The tax rate is expressed as mills per dollar of valuation. A mill is $0.001. When working with mills, you can either multiply the mill by 0.001 or divide by 1000 to get the decimal value.
Assessed Value = Market Value x Rate of Assessment
Real Estate Tax = Tax Rate x Assessed Value
To practice a few more examples, click through the interactive activity, or read the transcript below.
Click here to view the transcript of the above interactive activity. Links to an external site.
Home Insurance
The amount of a homeowner's insurance policy premium depends on the amount of insurance, the location of the property, and the type of construction of the home. The fire protection class is a number that reflects the quality of fire protection available in the area where you live. The closer you live to a fire station, the better. Below is a chart that lists the different premium amounts based on the fire protection class and material used to build the house.
To practice a few examples, click through the interactive activity, or read the transcript below.
Click here to view the transcript of the above interactive activity. Links to an external site.
Putting it All Together!
Taxes and insurance are typically charged as annual fees and distributed and added to your monthly mortgage payments. You typicaly pay in advance which means your taxes may be estimated and adjusted later if necessary. Ok, so what IS my monthly house payment, then? Let’s work through an example from start to finish to find the total monthly payment when taxes and insurance are added in. Try it on your own and then watch the video to see how you did!
Here is the information about your loan.
⭐️ Help Video:
If you found any of these problems challenging, here is a video that will go over some of the answers.
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