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VVISD Tax Impact

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Valley View ISD is estimating a Tax Rate increase of 27.5 cents to $1.395 if the bond passes.  We wonder if they may be estimating a little low since NCTC is estimating a 5% interest rate on their bond.  Both are estimated to be 25 years.

We did some analysis on the estimated VVISD increased taxes and bond payment.
First we divided $275/yr, (VVISD's estimate on a $100,000 house), into 12 months and got $23/mo. (rounded)
Secondly we used a loan amortization spreadsheet in Excel and plugged in a typical $100,000 home purchase on a 30 year note @ 4.25% interest and assumed 20% down.  That yielded a payment of $393.55 on a principal of $80,000.
We then changed the interest rate to 4.75% keeping the rest the same and we got an increased payment of  $417.32, an increase of $23.77/mo. or about the impact of the tax bond based on VVISD's assumptions.
We then switched back to 4.25% and changed the mortgage from $80,000 to $85,000.  That changed the payment to $418.15 or an increase of $24.60, slightly more than but close to the increase in taxes estimated by NCTC.
This analysis shows that the tax increase effect is similar to raising your interest rate by half a percent or borrowing $5,000 more above an $80,000 loan.  Put another way, if a family could only qualify to borrow $85,000 on a $100,000 house, they could now only qualify for a loan of $80,000 because of the increased tax payment.  If the borrower can qualify for a loan of $5,000 less than they would either need to have another $5,000 in cash to make up the difference or pay $5,000 less for the house which could in effect lower the value of the house by $5,000.
Furthermore, on escrow payments, often when a mortgage company finds out taxes have gone up, they want you to build up a reserve to cover it in addition to paying in enough for the actual increased tax payment on a monthly basis.  As a result, a homeowner could see an escrow payment go up 115-200% of the $23 depending on the timing of their escrow account, other payments and the date the taxes are due.

Link to Excel spreadsheet analysis of the above

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