Massachusetts Mortgage Calculator

Factors in Your Massachusetts Mortgage Payment

On top of your principal and interest payment, you have to pay property taxes to the city or town your home is in four times a year in Massachusetts. While Massachusetts’ average property tax rate seems low at 1.15%, the average property tax bill is $3,794, seventh-highest in the U.S. That’s due to the strong housing market and high home values, which lead to the higher overall tax bill.

Your property taxes are based off of your home’s assessed value and the area’s tax rate. The Bay State assesses residential real estate each year to determine the market value. Your property bill will be based off of that number, so if you have any issue with the assessment, you can file an abatement application. This isn’t guaranteed to get accepted but if it is, you’ll receive a refund for a portion of your property taxes. Senior citizens, veterans and blind residents can apply for property tax exemptions. The complete list of qualifying exemptions can be found on Massachusetts’ Department of Revenue property tax information webpage.

Another ongoing cost along with property taxes and your mortgage payment is homeowners insurance. In Massachusetts, the average annual premium is $1,451.64 based on our Most Affordable Places in America study. That makes the Bay State the ninth-highest state for homeowners insurance in the U.S.

Along with high prices is high vulnerability. According to the Insurance Information Institute (III), in 2012 Massachusetts had an estimated $393.6 billion of insured residential coastal property vulnerable to hurricanes. Combined with commercial property, it totals 54% of all insured properties in the state. The III estimated in 2013 that over 100,000 homes are exposed to storm-surge damage in Massachusetts. The takeaway is that flood insurance is a must for coastal homeowners. This type of coverage is found through the National Flood Insurance Program run by FEMA.

For those who can’t gain homeowners insurance through the voluntary market, the Massachusetts Property Insurance Underwriting Association (MPIUA) is the market of last resort. Also known as the FAIR Plan, this program provides basic property insurances for those unable to obtain coverage through normal means.

Costs to Expect When Buying a Home in Massachusetts

Before you get to paying the monthly, annual or quarterly costs associated with homeownership, you’ll have to pay a number of initial one-time costs during home buying. After you put an offer on a home, the next step is usually a home inspection. This helps you get a better picture of the condition of the home prior to closing the contract and moving in. While it’s not mandatory, almost every homebuyer opts for the opportunity to get an inside look at the underpinnings of their potential new home. In Massachusetts, home inspections cost anywhere from $300 to $500, depending on the size of the home and location.

The state grants licenses to home inspectors who meet minimum requirements that include training and passing an exam. While a home inspector will review the plumbing, walls, floors, basement, foundation and readily accessible portions of the home, they don’t inspect absolutely everything. If you want additional tests, such as water quality, air quality or mold, you’ll have to hire professionals in those fields or see if your home inspector offers those additional services.

After the final purchase and sales agreement is signed, you’ll proceed with your mortgage lender and set a closing date. On your closing, you’ll sign final documents and review all the mortgage paperwork. You also pay a number of fees known as closing costs. Massachusetts homebuyers can expect to pay 1% to 2.5% of the home value as closing costs. The amount will differ depending on a number of factors including the home’s location, what services you used in the home-buying process and what your lender charges for mortgage services.

Our Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each county’s median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the county’s median home value to find the closing costs as a percentage of home value figure. Sources: US Census Bureau 2015 5-Year American Community Survey, Bankrate and government websites.

Unfortunately, everyone wants a piece of the pie (your wallet!) when it comes time for closing. Your mortgage lender gets a large slice to pay for what’s called origination fees. This can be for loan processing, commitment fees, document preparation, tax service, underwriting, origin points and more. How large a slice depends on what your particular lender charges, as well as what services they provided you in the process.

The next portion of closing costs is doled out in smaller chunks to a variety of third-party service providers. If you used an attorney, that will be a portion of your closing costs, as well as the cost of an appraisal. A small slice goes to credit reports and flood certification, and a larger portion to the survey provider, if you had one.

Your lender will likely require title insurance, which is another one-time cost. In Massachusetts, there’s been talk of state regulation. Massachusetts is one of only three states in the U.S. that doesn’t license title insurers, and lawyers stand to make the most out of the practice (and have lobbied to keep it this way). For instance, in 2012, more than $252 million was spent on title insurance, with an estimated $167 million given to the lawyers who handle real estate closings in Massachusetts, leaving only $85 million to the actual insurance companies. Out of that original $252 million, only $12.7 million was paid out for losses and expenses from claims, totaling just 5%. Compared to home insurers who paid out 92%, the need for title insurance seems weak. Regardless, your lender will most likely require you to purchase a premium to cover the amount of the loan. The purpose is to protect the lender’s interest in a clean title and any future title disputes.

Finally, one last cost is Massachusetts’ real estate transfer tax. This particular fee is paid for by the seller, unless you make a different arrangement in your contract. The total can be a significant amount: the transfer tax equals $2.28/$500 of purchase price, or 0.00456%. This tax rate applies to every county except Barnstable, Nantucket and Dukes which charge additional transfer taxes.

Details of Massachusetts Housing Market

Home of Plymouth Rock and the famed Mayflower landing, Massachusetts has a long history as one of the 13 original colonies. Nicknamed the Bay State for its coastline, Massachusetts has 1,519 shoreline miles and 7,800 square land miles. As of 2016, the state’s population was an estimated 6.81 million. The largest cities include Boston, Worcester, Springfield, Lowell and Cambridge, according to the U.S. Census Bureau.

The Bay State is a tough place for hopeful homeowners. Eight out of 14 counties have conforming loan limits above the 2017 national limit of $424,100, with Dukes County and Nantucket County matching New York City’s limit at $636,150. Therefore, the cost of housing in those counties is quite high.

According to Zillow data, median home value rose 7.1% from 2016 to 2017. As of August 2017 median home value for the state was $378,800 and the median list price was $409,900. These high prices are what helped Massachusetts earn a low ranking (33 out of 50) on our Healthiest Housing Markets study. Affordability was the biggest detractor out of four measured factors including stability, risk and ease of sale.

The housing market is also hot in certain areas, particularly Boston and its surrounding cities and towns. As of August 2016, the average time on market for Boston properties was 50 days, according to Boston Realty Web, with well-located properties going in under a week with multiple offers. The city has a median home value of $563,300 as of August 2017, with a median list price a whopping $719,000, according to Zillow data. From 2016 to 2017, home values rose 10.4%.

Across the river in Cambridge, median home value is $734,400 with list prices averaging $796,500 (as of August 2017). Moving west to Amherst, home of one of the state’s top public universities, home values are lower at $316,500. South of Amherst, near the Connecticut border is Springfield, a city with much lower home values. The median home value in Springfield in August 2017 was $144,600 as the median home value.

Local Economic Factors in Massachusetts

Massachusetts is known as a hotbed for education, with Harvard University, MIT, Boston University, Northeastern University and Tufts University all calling the New England state home. Along with being a top college destination, key industries in Massachusetts include finance, renewable energy, defense and creative and maritime activities.

Thirteen Fortune 500 companies call Massachusetts home as of 2017, including General Electric, Liberty Mutual Insurance, TJX, Raytheon and Staples. According to the Boston Business Journal, the largest non-government employers in Massachusetts are Partners HealthCare, University of Massachusetts, Stop & Shop, Harvard University and Steward Health Care.

Overall, Massachusetts has a high personal income. According to the U.S. Bureau of Economic Analysis, in 2016 the Massachusetts per capita personal income (PCPI) was $65,137, which was second-highest in the U.S. and 131% of the national average, at $49,571. Unemployment is also generally lower than the national average in this state, with July 2017 estimates at 4.3% compared to the national rate of 4.4%, according to the U.S. Bureau of Labor Statistics.

While incomes may be high in Massachusetts, the playing field may be leveled when you take into account the state’s income tax rate. As a wage-earning resident of the state, expect to pay 5.1% in earned income as well as unearned income (interest, dividends and capital gains). Some capital gains are taxed at 12%. There are no tax brackets, as there are in some states; everyone is taxed at the same percentage. However, there are personal exemptions that taxpayers can claim for a lower tax bill. Sales tax is another flat rate in the state, at 6.25% regardless of what city or town you’re in.

Looking for more solid numbers? You can try the Massachusetts income calculator to help get a clear idea on what you’ll owe the state. Another useful planning tool is comparing your current cost of living to your projected future home.

Say, for instance, you’re moving east from Portland, Oregon to Boston, Massachusetts, specifically. Your cost of living would increase 14% on average if you were a single-income earning household making $60,000 a year due to higher taxes, housing and food costs. If you were moving from Atlanta, Georgia to Springfield, Massachusetts, your cost of living would decrease by an average 4% thanks to lower taxes and housing. A move from Chicago, Illinois to Cambridge, Massachusetts would see an average 12% increase in cost of living due to all three factors, with housing almost 25% higher.

Mortgage Legal Issues in Massachusetts

It may come as a surprise that Massachusetts is still somewhat of a “buyer beware,” or caveat emptor state. There are no laws requiring a written seller’s disclosure regarding the property condition. The only disclosures sellers must make are lead paint and the presence of a septic system. Unlike other, more protective states, Massachusetts sellers are not obligated to fill out a formal disclosure packet regarding the home to provide to the buyer. However, that said, the Massachusetts Association of Realtors has a seller’s statement of property conditions which is used in some cases, however commonly, is unknown. Disclosures aren’t a substitute for a home inspection, but can give the buyer a little peace of mind.

Massachusetts is also a non-judicial foreclosure state. This means the majority of foreclosures in the state don’t involve the court. Non-judicial foreclosures are generally faster and easier for lenders to execute than the judicial process, which involves a court, along with lawsuits and appeals in some cases.

The process starts when the borrower misses a mortgage payment. The lender will send collection letters or call the homeowner to discuss missed payments. According to Massachusetts law, the borrower needs to make a good faith effort to respond to a creditor’s notice, which includes a completed mortgage modification options form and a completed loan modification application.

If an agreement isn’t achieved for loan modification or other repayment alternatives, and the homeowner doesn’t pay what’s due, the lender sends a right-to-cure notice. This gives the homeowner 150 (or in some cases 90) days to bring mortgage payments current. There is some protection, such as the lender cannot accrue excessive fees and penalties against the homeowner. The homeowner can also use Massachusetts foreclosure resources such as counselors.

After those 150 or 90 days, the lender sends an acceleration notice which means the loan, in full, is due. The only way to stop the foreclosure is to pay off the full amount of the loan. This notice has to be sent at least 21 days before a foreclosure sale. The sale has to be published publically, typically in the newspaper and will include date, time, place of sale and description of the property.

Generally, the earliest date the home can be sold at a Massachusetts foreclosure auction is 196 days after the initial missed mortgage payment. According to Mass Legal Help, the lender can pursue a deficiency (if the home sells for less than the loan) if it’s included in the notice before the auction.

As for Massachusetts’ right of redemption, if the foreclosure in non-judicial and used a power of sale clause in the mortgage, there is no right of redemption. If the foreclosure was judicial, there is a redemption period. There are always exceptions to the rules, and homeowners at risk of falling behind on their mortgage can use the Massachusetts Consumer Affairs Foreclosure Resources or contact an attorney or legal counsel for help.

Massachusetts Mortgage Resources

MassHousing is one of the first places for homebuyers and homeowners to look to for affordable housing in Massachusetts. The quasi-public agency has provided more than $20 billion for affordable housing since its creation in 1966. Find comprehensive homebuyer education and assistance ranging from home loans to counseling classes.

Another agency available to residents is the Massachusetts Housing Partnership (MHP), a public non-profit for affordable housing. First-time homebuyers can take advantage of the ONE mortgage program offered through MHP. This 30-year fixed-interest loan comes with only a 3% down payment requirement if you qualify. You’ll have to meet requirements such as completing a homebuyer education class and having a household income within the limits and meet credit requirements along with a number of other criteria.

Buying in Western Massachusetts or another rural part of the state? Take a look at the USDA website to see if the property is in an eligible area. If so, and if you meet income limits, you could benefit from a government-backed USDA home loan.

Moving from out of state? Try punching in your salary to see how it changes in “Tax-a-chusetts.” If you’re accustomed to an income-tax free state, you might get a shock when you see your take home pay post-taxes in Massachusetts.

Undeterred? Start your planning with an overview of Massachusetts mortgage rates. Remember, a number of counties in Massachusetts have higher conforming loan limits, which allows you to get a conventional mortgage rather than a jumbo loan (with higher interest).