Caveat Emptor: Property Tax Exemptions & Demographic Risk in the Housing Market

If you are buying a house this year, then beware of property tax exemptions and demographic risk in the housing market, i.e., specifically, understated property tax estimates reflected in your projected monthly mortgage payment. When the seller of the property is a senior receiving a 100 percent property tax exemption, then your first “real” monthly mortgage payment can very easily be largely understated, and in some cases significantly so based on the property value. Errors in the underwriting process and realtor advertising can make for significant “payment shock” and imperiled repayment prospects just as you are handed the keys to your new castle. Monthly debt services include principal, interest, taxes and insurance (in typical instances).