Does it seem like everyone’s buying a house in Florida these days? There's a good reason— over 900 people move to the Sunshine State every day. But how much does it actually cost to live in the Sunshine State, and can you really afford it?
Here’s everything you need to know about calculating your potential mortgage costs in Florida:
Why Buy a House in Florida?
More than 900 people move to Florida on a daily basis for a reason. But what exactly are these reasons?
1. Warmer Weather
One of the main draws of living in Florida is warm weather. The state of Florida typically sees temperatures in the 70s and 80s year-round. Floridians say that there are only two seasons: summer and less-hot summer.
This means that most of the state never even sees a single snowflake, which means no shoveling snow, no freezing pipes, and no space heaters necessary.
The amazing Florida weather means that residents can enjoy all the outdoor amenities that the state has to offer year-round. In Florida, it’s totally possible to go to the beach in December, go boating in January, and go swimming in February — things that wouldn’t be possible just about anywhere else.
2. Lower Cost of Living
Another draw of Florida living is that the statewide cost of living is actually lower than the national average. Of course, the cost of living varies depending on where you are.
So if you’re in a big city like Miami, you can expect to see higher costs of living. However, if you’re in a smaller town like Gainesville, you can expect to see lower costs of living.
Your impression of cost of living also varies depending on where you’re coming from. So if you’re coming from a more expensive city like New York City, Florida may seem affordable by comparison. But if you’re coming from a more affordable city like Jackson, Mississippi, you may experience some sticker shock seeing the home prices in Florida.
3. No State Income Tax
Another unexpected draw of living in Florida is that there’s no state income tax. State tax rates vary by state. Only a handful of them have no state taxes at all — and Florida is one of them. Not having to pay this tax can save you thousands of dollars a year. This is money that you can then put toward your Florida mortgage.
How To Calculate Your Mortgage Payment in Florida?
Florida has a ton of great places to buy a house or condo, but how much will it actually cost? Your mortgage amount will consist of several different components, including principal, interest, taxes, insurance (like flood insurance), and HOA and CDD fees, if applicable.
The most obvious component of your mortgage is the principal. The principal refers to the amount of money the home buyer originally borrowed. So if you’re buying a house at the state’s median sales price of $355,000 with a 20% down payment, your principal amount would start off at $284,000.
The second component of your mortgage is the interest rate. The interest rate refers to the cost of borrowing money. Interest rates range significantly depending on the economy and the creditworthiness of the borrower. So if you have a higher credit score, you can usually qualify for lower interest rates.
To get the best interest rates in Florida and elsewhere, you should aim for a credit score above 740. Right now, if your credit score is above 740, you can expect to qualify for an interest rate of 3.372% for a 30-year fixed-rate loan. For credit scores between 720 and 739, the average interest rate is 3.445%.
For credit scores between 700 and 719, the average interest rate is 3.635%. For credit scores between 680 and 699, the average interest rate is 3.839%. And for credit scores below 680, you can expect to pay an interest rate above 4%.
So let’s say you have a good credit score and qualify for an interest rate of 3.372%. You would end up paying about $1,255 a month for both your interest and principal. Keep in mind that at the beginning of your loan term, most of your payments are going toward interest. As you continue to pay off your loan, more of your payments will go toward the principal.
Some lenders will also look into your Debt-to-Income Ratio (DTI). A favorable number could work in your favor.
The third component of your mortgage is the local property tax that covers things like public schools, public libraries, roads, parks, police departments, and fire departments. You pay property tax based on the assessed value of your home. After you buy a home, the assessed value is equal to the home's purchase price.
Different Florida counties have different property tax rates that average between 0.47% in Lafayette County to 1.19% in St. Lucie County. So let’s say you purchased a home for the median price of $355,000 in St. Lucie County with a tax rate of 0.47%. Your tax payment would equal $1,668.50 a year or $139.04 a month.
However, if you purchased a home in St. Lucie County for the same price with a tax rate of 1.19%, your tax payment would equal $4,224.50 a year or $352.04 a month.
In South Florida, Miami-Dade County is 1.02%. This calculates to $2,756 annually, or $229.67 a month.
The average property tax rate across the entire state of Florida is 0.98%, so if you’re not quite sure where you want to purchase a home yet, you could reasonably expect to pay $3,479 a year or $289.92 a month for a $355,000 house.
The fourth component of your mortgage is your homeowner’s insurance policy that protects your home in the case of damage from natural disasters, burglary, and vandalism.
Most mortgage lenders require that you have a homeowner’s insurance policy when you purchase your home and maintain the coverage throughout the term of the loan.
Homeowner’s insurance is more expensive in Florida since there’s a greater risk of hurricanes, winds, and flooding. However, the cost of your homeowner’s insurance will depend on the size, location, and features of your home.
According to Insurance.com, the average cost of homeowner’s insurance across the state of Florida is $3,643 per year. This works out to be about $303.58 in dues per month. This amount is substantially higher than the national average of $2,305.
5. HOAs and CDDs
There are potential fifth and sixth components of your mortgage if you live in a community with Homeowners Association (HOA) fees and/or Community Development District (CDD) fees.
HOA fees cover the costs for community amenities, maintenance, and repairs. CDD fees cover the cost of developing community infrastructure and amenities in newly built communities.
Of course, these costs don’t apply to homes that aren’t located in communities with HOAs and CDDs. However, these entities are quite common in Florida, and they can be difficult to avoid. Typical HOA fees in Florida can range between $100 and $200 a month, whereas typical CDD fees can range between $1,000 and $3,000 a year.
So assuming that you live in a community with both HOA and CDD fees that fall in the middle of those ranges at $150 a month and $2,000 a year, respectively, this adds up to an additional $316.67 to your monthly mortgage payment.
Adding It All Up
Now that we’ve discussed all the different elements of a mortgage payment in Florida based on statewide averages, it’s time to add it all up to determine what it might cost for you to own a home in the Sunshine State.
Principal and Interest: $1,255
Property Taxes: $289.92
Homeowner’s Insurance: $303.58
HOAs and CDDs: $316.67
Grand Total: $2,165.17 a month
Of course, these are just averages, and your costs can either be higher or lower depending on the price of the home, your down payment amount, the interest rate, the property tax rate, your homeowner’s insurance premium, and community-related fees.
How To Lower Your Mortgage Payment in Florida
It’s possible to buy a house in Florida with an affordable mortgage payment with these five guidelines:
1. Put More Money Down
To lower your mortgage payment, you should consider putting more money down. Putting at least 20% down on the house can help you avoid private mortgage insurance (PMI) that can add hundreds of dollars to your monthly mortgage payment.
If you aren’t able to put down 20% at the time of closing, you may also want to consider paying more into your mortgage so that you can quickly reach 20% equity and get rid of PMI.
2. Get a Lower Interest Rate
To lower your mortgage payment, you should try to get a lower interest rate. If you haven’t purchased a home yet, it’s always a good idea to shop around with different lenders to see what rates you qualify for.
Choose the lender with the lowest rate, keeping in mind that a seemingly small difference of one-tenth of one percent can save you a ton of money not just monthly but over the entire term of your loan.
However, if you have already purchased a home, you may want to consider refinancing your mortgage to receive a lower interest rate.
3. Extend Your Loan Term
To lower your mortgage payment, you should consider extending your loan term. 15-year loans come with higher payments compared to 30-year loans. While a 30-year loan means paying more in interest, this type of loan often comes with more affordable monthly payments.
4. Lower Your Homeowner’s Insurance Premium
To lower your mortgage payment, you should try to lower your homeowner’s insurance premium. Get quotes from different companies to see if you can get a better rate elsewhere. You can also make strategic improvements to your home that will result in better rates from your insurance company.
5. Avoid Communities With HOAs and CDDs
Finally, to lower your mortgage payment, you may want to consider avoiding buying in communities with HOA and CDD fees. While these communities may look nice and come with great amenities, you’re paying for it on a monthly and annual basis — adding hundreds of dollars to your mortgage payment.