Minnesota Mortgage Calculator

Factors in Your Minnesota Mortgage Payment

After you get an idea of what your mortgage payment will be (principal plus interest), you’ll want to consider property taxes and homeowners insurance. These two costs go hand-in-hand with homeownership.

Minnesota property tax rates are close to the national average, meaning you won’t save money in this department if you’re moving from a low-tax state. The state’s effective average tax rate is 1.02% of your home’s value.

Property taxes are calculated in two different ways in Minnesota: levies on net tax capacity and market value levies. Counties generally collect net tax capacity for ongoing government functions. For net tax capacity, you subtract exclusions from your home’s market value. The homestead exclusion is the most commonly claimed as it applies to owner-occupied residences. After you subtract applicable exclusions, multiple by the home’s class rate to get net tax capacity. Class rate will depend on the type of property. For example, residential homestead are taxed at the rate of 1% up to the first $500,000 in market value, and then 1.25% on anything above $500,000.

Market value levies are usually voter-approved and for projects rather than ongoing government costs. These taxes apply to your estimated market value. Your effective tax rate will depend on where the property is located. If you’re interested in calculating your Minnesota property taxes, we have a county break down as well as calculator to help you do so.

The county where you home is located is generally responsible for assessing your home’s value. Some counties will assess sales in the previous 12 months to determine market value each year. You may see your property’s value increase or decrease during this time. If you disagree with the assessment, there are provisions for you to dispute the assessment. There are also provisions for special populations. If you’re over 65 and make $60,000 or less, Minnesota has a senior citizen tax deferral program that issues a low-interest loan from the state to cover your taxes until you can afford to pay. Disabled veterans can receive various amounts of market value tax exclusion depending on disability level.

For homeowners insurance, Minnesota's costs generally rank near the top of the country. It wasn’t always this way, though. In the 1990s, Minnesota homeowners insurance rates ranked as the 12th-most expensive in the U.S., according to Insurance.com data. Once 2002 hit, insurance rates skyrocketed for most homeowners, and they continue to climb. Partly to blame is the amount of damage claimed for various weather-related damages. Minnesota homeowners face hail, straight line wind and tornadoes. In 2016 Minnesota experienced 44 tornadoes. As for hail, Minnesota had the second-highest average annual property claims loss from 2000 to 2013. Minnesota had 69 tornadoes and one related fatality in 2020.

The current average annual homeowners insurance premium in Minnesota is about $2,309, according to Insurance.com. If you’re looking for specifics, the Minnesota Commerce Department website has a section dedicated to home insurance basics. This can help you understand what coverage generally includes, and what it leaves out, such as sump pumps and pools. Lastly, Minnesota has a FAIR Plan coverage which is a market of last resort for those unable to obtain homeowners insurance or dwelling fire coverage from a private insurance company.

A financial advisor can help you understand how homeownership fits into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, taxes, insurance and more, to make sure you are preparing for the future.

Costs to Expect When Buying a Home in Minnesota

If you’re still in the initial stages of home-buying planning, you’ll want to consider some of the one-time upfront costs. One of the first costs you’ll come across is a home inspection. This is when you find a home you’d like to buy. Generally most buyers will arrange for a home inspection after putting in an offer on the house, but some buyers will negotiate for a pre-offer inspection. Whichever you choose, the cost is the same. Most home inspections run between about $200 and $450, and depend on the size and type of home. Smaller square footage dwellings and condos generally are on the lower end of the scale. While a home inspection covers structural system, roof, plumbing, electrical and more, it won’t cover specialties such as radon, termite damage or mold. If you’d like to arrange additional tests, it will cost you extra and is optional.

One of the last costs you’ll factor in is a bundle of service fees and charges known as closing costs. These fees are for your mortgage lender, the state and county and a number of other entities, depending on who was involved in the mortgage and buying process. The exact sum depends on a number of factors, and you’ll pay it on the day you finalize paperwork and get keys to the property.

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 include the U.S. Census Bureau, Bankrate and government websites.

Closing costs can be thought of as lender origination fees and third-party fees. Lender fees include underwriting, tax service, broker charge, document preparation, commitment fees and origination points. Each of these fees will depend on the size of the loan as well as your particular lender. Some charge for certain services such as document preparation and some don’t.

Third-party fees can include appraisals, attorney fees, credit reports, flood certification and surveys. Not all home purchases will include these charges, such as a survey. It will depend on your particular situation and the property you’re buying.

You’ll also pay for title insurance at closing. Title insurance protects against defects such as unpaid taxes, liens, easements, missing heirs and more. Most lenders will require you to purchase a policy that will cover the lender’s interest in the property, but you also have the option to purchase an owner’s policy. Technically, who pays for the title insurance can be a negotiable item between buyer and seller. However, in Minnesota, the buyer usually pays for the premium.

Minnesota is one of the states that charges a mortgage tax. The state collects 0.23%, and Ramsey and Hennepin counties collect an additional 0.01%. The tax is imposed on the recording of a mortgage, and the borrower is the person who’s liable to pay it.

Lastly, Minnesota has a deed tax that the seller of the property pays. The tax rate is 0.33% for all counties except Hennepin and Ramsey which have a rate of 0.34%.

Details of Minnesota Housing Market

Minnesota, also known as the North Star State, has just 5.7 million residents, according to the Census Bureau. In comparison, that’s about 65% of New York City’s population. What Minnesota lacks in population, however, it makes up for in size. The Canada-bordering state is the 12th-largest in the U.S. by size, encompassing roughly 86,900 square miles. While much of the land is farm or forest, you will find a number of metro areas in the state. The largest cities in Minnesota are Minneapolis, St. Paul, Rochester, Duluth and Bloomington. The twin cities of St. Paul and Minneapolis are on the southeastern side of the state and border Wisconsin. Duluth is northeast and borders Lake Superior. The most northern and southern and western parts of the state have the least number of residents.

Minneapolis and St. Paul experienced an extreme shortage of homes available for sales, according to the University of St. Thomas Real Estate Analysis. In St. Louis County, home to Duluth, the median home value is $157,900. In Ramsey County, home to St. Paul, the median home value is $229,600.

Some of the most affordable places to live in Minnesota, as ranked by our study, are Otsego, Montevideo, Redwood Falls and Austin. This study factored in average closing costs, property taxes, homeowners insurance, average mortgage payment and median income.

Local Economic Factors in Minnesota

Much of Minnesota’s gross domestic product (GDP) stems from industries such as manufacturing, biosciences and health care services, data centers, banking and technology. The North Star State has several companies on the 2021 Fortune 500 list, including UnitedHealth Group, Target, Best Buy, Land O’Lakes and 3M. The largest employers in the state include the famed Mayo Clinic, the State of Minnesota, the Federal Government, Target and the University of Minnesota, according to Minnesota Employment and Development.

With a 3.1% unemployment rate in December 2022, Minnesota is below the national rate of 2.5%. According to the Bureau of Economic Analysis in 2021, Minnesota's $66,280 per capita personal income (PCPI) is also just above the U.S. mark, which is $65,148. The state has seen steady growth in income levels over the last decade.

Minnesota has one of the highest tax burdens overall. If you move to the North Star State, you’ll be looking at a steep income tax that ranges from 5.35% to 9.85%. How much you’re taxed will depend on your income levels. The more taxable income you bring in, the higher the tax bracket you’ll find yourself in.

You won’t get a break if you’re retired, either. Minnesota is one of the few states that taxes Social Security benefits. In addition, sales taxes will cost you up to 8.875%, depending on what county you’re purchasing in. Lastly, estates more than $3 million are subject to estate tax at progressive rates. This means if you inherit a fortune in Minnesota, be prepared to shell out significant taxes.

An easier way to gauge how far your money will go in this state is using a cost of living calculator. You can plug in your current or projected income and see how much taxes, food costs and house expenses differ from your current home. For example, if you were a couple living in Boston, MA with a combined income of $120,000, your average cost of living in Minneapolis would be 14% lower overall due to lower housing and food costs. Or, if you were moving north from Austin, TX to St. Paul in the same scenario (two people with household income of $120,000), your cost of living would be 3% higher due to much higher taxes in Minnesota than Texas.

Mortgage Legal Issues in Minnesota

If you’re buying a property in Minnesota, you’ll be somewhat protected by Minnesota disclosure requirements. While most states have moved away from traditional “buyer beware” property laws, many haven’t put those protections in writing. Minnesota law states that the seller of residential property must “include all material facts of which the seller is aware that could adversely and significantly affect an ordinary buyer's use and enjoyment of the property or any intended use of the property of which the seller is aware.” To capture this data, the Minnesota Association of Realtors has a nine-page disclosure that most sellers fill out. The disclosure includes questions regarding the property’s plumbing, electrical, structure and a variety of other home condition information.

Curious how the Land of 10,000 Lakes deals with foreclosure? Minnesota generally has two types of foreclosures: foreclosure by action or foreclosure by advertisement. Foreclosure by action involves a lawsuit and the judicial system. This is generally a slower process, but lenders can pursue a deficiency judgment with this type of foreclosure. A foreclosure by advertisement is non-judicial and generally quicker as it doesn’t involve a lawsuit. The Minnesota Homeownership Center foreclosure infographic outlines the general timeline for foreclosure. It includes a default notice, pre-foreclosure notice, and Sheriff’s sale date. During this period homeowners can seek free counseling or apply for loan modifications and other options. There are many chances for homeowners to seek help or file for postponement during the process; the lender by law has to comply with certain requests. If the house goes to sale, and is sold, the homeowners has a redemption period of six to 12 months where the homeowner can redeem the home if he or she can pay off the sale amount.

In 2013, Minnesota passed a new law regarding foreclosure rules in the state. Some of the key provisions include a “private right of action” where homeowners can bring a foreclosure case to court if they believe their lender has broken the law. If the homeowner wins the case, he or she can collect legal fees. Another provision is that lenders have to officer loan modifications and halt foreclosures while eligibility is determined.

Minnesota Mortgage Resources

If you’re wondering what resources Minnesota offers homebuyers, you might be pleasantly surprised. The state has a range of entities offering help. The Minnesota Housing Finance Agency offers a variety of programs. There’s Start Up, a down payment and closing cost assistance program for eligible first-time borrowers. Step Up is a program for current homeowners hoping to purchase a different home or refinance a home. The program includes affordable loan interest rates and down payment and closing cost assistance. Both Start Up and Step Down have income limits that will impact your eligibility. You can also find information on the mortgage credit certificate program which allows certain borrowers to claim a percentage of mortgage interest to save up to $2,000 a year in taxes.

Minneapolis low- to moderate-income families can search for affordable homes through the City of Lakes Community Land Trust (CLCLT). The nonprofit organization also offers a Homebuyer Initiated Program (HIP) which helps people purchase and fix single-family homes with affordability and rehab grants.

For even further resources, you’ll find a list of homebuyer incentive programs on OwnAHomeMN.org, including affordable housing financing, education, incentive programs and downpayment assistance.

You can also find plenty of areas in Minnesota within USDA eligibility, if you’re looking at rural property. To qualify for a USDA loan, you will need to meet certain eligibility criteria, including certain income limits.

If you’re facing foreclosure in Minnesota, there are a number of places to turn, including the Minnesota Homeownership Center. This is the resource the Minnesota government points homeowners to for advice and confidential counseling for a statewide network of advisors.

If you’re hoping to move to Minnesota from elsewhere in the country, here’s quick refresher that’ll remind of all the things you’ll love about the state with 10,000 lakes. More interested in money matters? Plug your salary into the Minnesota paycheck calculator to get an idea of your projected take home pay.