Building a tight household budget

So, you estimated monthly mortgage payments to see what you can afford and … somebody just broke the news you need to factor in other payments, too. Yep.

Here are some costs of homeownership related to carrying a mortgage. An example of how they might translate to dollars per month is at the end of this article.

Property Taxes

When Ben Franklin said (more or less) that taxes are a certainty, he for sure could have been talking about property taxes.

Property taxes are the biggest cost of homeownership after your mortgage. Homeowners pay annual state and/or local property taxes based on a percentage of the government’s “assessment” (determined value) of land and the house on it.

Although you’ll get a property tax bill after you buy a home, it can be hard to estimate ahead of time. Local governments assess properties every year, and the tax rate can change when property title is transferred from one owner to the next.

“If you really want to pin it down,” says Brian Martucci, a loan officer at Capital Bank, N.A., “search online for the ‘real property assessment and tax office’ of the county where you’re house hunting.”

You’ll need a property address to enter into the search form – either the house you want to buy, or one for sale in your preferred neighborhood and price range to help you understand what you might owe.

Homeowners Insurance

Homeowners insurance isn’t a legal obligation like car insurance. However, it’s required by most mortgage lenders to protect the value of their investment against fire or other disaster.

Relatively speaking, homeowners insurance isn’t expensive. But it pays to shop around for the best rates. Martucci recommends talking with several insurance agencies. He says to make sure you’re asking each agent for the exact same amount of coverage so you can “compare apples to apples.”

Private Mortgage Insurance

A buyer who makes a low down payment – usually less than 20 percent of the purchase price of a home – will have to carry Private Mortgage Insurance (PMI).

It’s no good shopping lenders to get rid of this – it’s a Federal Housing Authority (FHA) requirement. With little equity in the home, an owner doesn’t have a big financial stake. So PMI protects the lender if the loan isn’t repaid.

If you’re a candidate for PMI, know that the larger the down payment you make and the higher your credit score, the better insurance rate you’ll qualify for. And, once your equity reaches 20 percent or more of the home’s value, you may be able to get your lender to drop the PMI requirement.

Sample Cost Breakdown*

It’s time for some numbers that illustrate what we’ve been talking about.*

Let’s say you buy a house for $300,000 with a $15,000 down payment, and get a 30-year loan at an interest rate of 4.5%. You can calculate your monthly mortgage payments for $285,000 online.

With a credit score of 760 or higher, your PMI likely will be $1,083 a year, according to Martucci.

If you happen to buy that house in the Washington, DC suburb of Montgomery County, Maryland  – the home of Capital Bank, NA headquarters – your combined state, county, and municipal property tax rate could be in the range of 1.2% per year ($3600) if your house was assessed at the price you paid.

For the purposes of this example, we’ll say home owner’s insurance is $648.00 per year (the low-end of the current county range provided by online insurance aggregators).

Here’s what your monthly mortgage-related payments could look like:*

$1,444.05 Mortgage payment
$90.25 PMI
$300.00 Property taxes
$54.00 Homeowners insurance
$1,888.30 TOTAL


Do all these costs make you question how much home your paycheck can handle? If you’d like more information, contact one of our knowledgeable home loan officers to find out about loans that will work for you!


*The numbers used here are for illustration purposes only and are not intended to represent any actual mortgage or mortgage/homeownership-related costs. For mortgage information and associated costs that would pertain to your situation, please consult with a mortgage loan officer at This information is not meant to be legal, financial planning, or mortgage planning advice.  Your individual situation may be different.  Capital Bank, N.A. is not a debt management, tax planning, financial planning or credit counseling service provider. The information provided is strictly for informational purposes and not meant as legal or financial advice. Please seek professional advice from an accountant, financial advisor or credit counselor.