Many individuals are contemplating leaving the high-cost state of California and relocating to more affordable destinations such as Texas or Tennessee. However, before making such a life-altering decision, it is crucial to examine the financial aspects involved. In this blog post, we will delve into a comprehensive analysis of the costs associated with moving from California, exploring mortgage payments, property taxes, and equity transfer.
The Numbers – Moving from California:
To gain a clear understanding of the financial implications of moving from California, let’s consider a scenario where a homeowner in southern California possesses a house currently valued at $1.3 million. Assuming an equity of $600,000 and a loan amount of $700,000 with an interest rate of approximately 3%, the monthly mortgage payment for principal and interest is estimated to be around $2,340. Additionally, California property taxes, approximately 1.25% of assessed value, would add an extra $1,042 per month. This results in a total monthly holding cost of $3,082.
Comparing Tennessee and Texas:
If the decision is to move to Franklin, Tennessee, and purchase an equivalent home for $1 million, transferring the $600,000 equity from the California home would lead to a new loan amount of $400,000. Assuming an interest rate of 6.825%, the monthly payment would increase to $2,614. However, property taxes in Tennessee are lower, adding approximately $475 to the monthly costs. Combining mortgage and property taxes, the total monthly expense in Tennessee would be around $3,089, resulting in a cost savings of approximately $293 compared to California.
On the other hand, moving to Keller, Texas, with a million-dollar home purchase would result in a similar loan amount of $400,000. However, the higher property tax rate in Texas (2.26%) would significantly impact the monthly expenses. Property taxes alone would amount to approximately $1,883 per month, leading to a total monthly cost of $4,497. This represents an increase of $1,115 compared to California, making Texas a more expensive option.
Making an Informed Decision:
When considering a move from California, it is crucial to carefully evaluate the financial implications. The analysis shows that moving to Tennessee can offer a notable cost savings, particularly when purchasing a million-dollar home with existing equity. However, moving to Texas may result in higher living expenses due to the combination of mortgage payments and property taxes.
Conclusion:
Before making a decision to leave California, it is essential to conduct a thorough financial analysis. Consider factors such as mortgage payments, property taxes, and equity transfer to determine if the move will truly provide the desired cost savings. With a clear understanding of the numbers, you can make an informed decision about your relocation plans.
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