New Jersey Mortgage Calculator

Factors in Your New Jersey Mortgage Payment

There are a number of additional expenses to add on top of your mortgage principal and interest payments. The two biggest considerations are property taxes and insurance. Property taxes in New Jersey are the highest out of all 50 states. While the national average effective tax rate is about 0.99% of your home’s value, New Jersey’s rates hover near 2.26%. Most property values are pretty high in this Northeastern state, which means correspondingly larger tax burdens. Overall, the average annual property tax bill paid in New Jersey is about $8,796 which is again the highest in the country.

Each municipality in New Jersey has its own tax rates. The state doesn’t collect any of the property taxes; everything that homeowners pay goes directly to local governments. If you own a home in the Garden State, your property’s value is determined by a local assessor. Once that’s determined, New Jersey’s Division of Taxation adds an equalization ratio to ensure that the value is fair and that everyone pays a fair share.

Taxes vary between counties and cities more than you might think. Each school district levies taxes as well as the municipality and county. An example of disparate taxes across the state is Cape May County’s effective tax rate of 1.51% compared to Camden County’s 3.46% rate.

While taxes are high, there are a few property tax relief programs, including a deduction for senior citizens, disabled persons, veterans, tax freeze for seniors and the homestead benefit program. The homestead benefit program is for those with income under a certain amount and the deduction is calculated per eligible property. The New Jersey Department of the Treasury has information on each program on its Division of Taxation website.

Fortunately, homeowners insurance is slightly less of a burden in New Jersey than its property taxes. The state has an average annual premium of $1,174, according to Insurance.com data. However, if you’re looking at a coastal property, which constitutes about 34% of all insured properties in the state, you’ll need to add flood insurance on top of your normal homeowners insurance. Most of New Jersey’s coastline is susceptible to storm surges, so you’ll want to keep that in mind when you’re considering your coverage options. Flood insurance is covered by the National Flood Insurance Program.

Another element to keep in mind is hurricane damage in New Jersey. In 2012, Hurricane Sandy caused $6.3 billion in private insurance losses in New Jersey. If you buy in this state, you’ll want to shop around for insurance that will cover your property under a number of adverse conditions. Another hurricane is always a possibility, so you’ll want to make sure your property’s covered. In 2020, 95,473 homes in New Jersey were at risk of category one hurricane storms.

If you can’t obtain insurance through a private company, you can apply for coverage through the New Jersey Insurance Underwriting Association (NJIUA). NJIUA’s mission “is to provide essential property insurance to applicants who cannot secure coverage in the voluntary market.” Since it’s considered a last-resort market, the entity doesn’t seek customers and provides basic coverage only.

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 New Jersey

One thing to consider when buying a home in New Jersey are costs that will only occur during the initial home-buying and closing phase. When you find a property you’d like to buy, one of the first things you’ll need to arrange is a home inspection. In New Jersey, you can expect to pay an average between $250 to $650. Most home inspections don’t include additional testing. You’ll have to request for additional tests such as termite inspections, mold and other potential home hazards. It’s the buyer’s responsibility to arrange and pay for any additional inspections. Add-on tests can cost you around $85 and up. Usually your primary home inspector will offer those services as additional options to a home inspection, but that’s not always the case. One last consideration is that you should check to see if the property is in one of New Jersey’s radon high potential areas. Even if the home isn’t in a tier 1 location, New Jersey’s Department of Environmental Protection recommends testing all homes for radon concentrations.

Once it’s time for closing, you’ll have to pay a number of fees to different entities to complete the deal. These are called closing costs and can vary based on the location and value of the home, along with a number of other factors.

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.

Part of your closing costs will go to your mortgage lender. These are known as origination fees. It includes origination points, commitment fees, document preparation fees (which aren’t charged by all lenders), mortgage broker fee, processing and underwriting. Each mortgage lender will charge different amounts depending on its administration. If you buy a home with a VA loan, you’ll also pay what’s called a funding fee and a VA appraisal fee.

Additional costs will include a credit report (usually around $30), and a survey (closer to $700, if you choose to have one). You’ll also have to consider title insurance, which insures against any outstanding liens, misfiled deeds or any other issues with former owners. Most lenders require that borrowers have a policy through the company (which covers the loan amount), but you can also buy an additional owner’s policy to cover the home’s entire value. Luckily, you’ll save on one fee: New Jersey is not a state that charges a mortgage tax.

Realty transfer tax are another consideration. Usually the seller is responsible for paying the fee, but sometimes during negotiations the buyer will pay for a percentage. In New Jersey, transfer taxes are calculated in $500 increments based on the price of the home. You can use New Jersey’s realty fee schedule to see how much it will cost. One thing to note is if you’re buying a home that costs more than $1 million, there’s an additional tax of 1%, or $5/$500. The good news is that there are certain exemptions and reductions to these fees for seniors and other special populations. Luckily, the Constitutional Officers Association of New Jersey (COANJ) has created a realty transfer tax calculator that takes those factors under consideration and can give you the fee based on your situation. On top of state fees, there’s also a county fee of about 0.1%. Again, most of these costs are the responsibilities of the seller.

Details of New Jersey Housing Market

New Jersey is the fourth smallest state by size, but it boasts the 11th-largest population with 9.24 million residents. These two factors combine to make it the most densely populated state in the country. Much of New Jersey’s population is grouped in the northeast counties of Bergen, Hudson, Passaic and Essex which are near New York City. Another large concentration of residents is located in Camden along the southwestern edge of the state, bordering Philadelphia. The largest cities in New Jersey are Newark, Jersey City, Elizabeth and Edison in the northeast, and Paterson in the north.

While the state boasts a long coastline and reputation as a vacation destination, much of New Jersey’s beachfront property was damaged during Hurricane Sandy in 2012. While many affected towns have been rebuilt in the last five years, some areas have been completely abandoned due to sea-level rise. If you’re considering New Jersey for a vacation home or as a potential full-time resident, you’ll want to consider the increased hurricane risk and issues that correspond with higher water levels and subsequent erosion.

New Jersey didn’t rank well in SmartAsset’s Healthiest Housing Markets study. It ranked 50th due to a high percentage of homes with decreasing values, number of homes with negative equity and a few other factors. That said, some of the best places to own a home within New Jersey are Paramus, Glen Rock, River Edge, Kenilworth and Rutherford. These cities had the highest statewide scores in the study.

Looking at the big picture, New Jersey’s median home value is currently $389,800. Homes cost more in desirable areas, such as Bergen County, which has a median home value of $477,400.

Local Economic Factors in New Jersey

If you’re moving to the Garden State from somewhere in the Midwest, or a state that has no income tax like Texas or New Hampshire, prepare for a shock to your wallet. New Jersey state income taxes are some of the highest in the country. Combine that with the highest property taxes in the U.S., and you have an expensive cost of living in this Northeastern state.

Sales tax is 6.625% for the entire state, minus 32 “urban enterprise zones” which only charge 3.3125%. However, if you’re a car owner, you’ll be happy to know that gas taxes are among the lowest in this state. That might be good news to the more than one in seven New Jersey commuters who have “mega commutes” of over an hour. New Jersey ranks number two in the nation with longest commute times, thanks to many residents commuting to New York City. Along with those numbers, New Jersey has the most residents working out of state in the U.S. However, as you might guess, the COVID-19 pandemic has changed this dynamic quite a bit.

New Jersey is home to over 60 colleges and universities, most notably Princeton University and Rutgers University. It also boasts 3 of the top 15 wealthiest counties in the country according to US News: Hunterdon County, Morris County and Somerset County. Along with wealth, the state doesn’t lack for industry, either. New Jersey is home to quite a few companies on the Fortune 500 list, such as Johnson & Johnson, Prudential, Merck and Bed Bath & Beyond. Most of the state’s key industries are clustered along the edges of the state border. Key industries include transportation and logistics, finance, healthcare and hospitality. As of December 2022, the state’s unemployment rate was 3.4%, while the national rate was 3.5%.

If you’re ready to move to the most densely populated state in the U.S., you may want to get a head start on budgeting by comparing your cost of living to life in the Garden State. Take, for example moving from New York, NY to Orange, NJ – a popular move for many growing New York-based families. Life in Orange will cost 9% less on average, with cheaper taxes, housing costs and food. A move from San Francisco to Hoboken, NJ will save you 9% on living costs on average. If, however, you’re moving from Kansas City, MO to Jersey City, NJ, you’ll pay 19% more on average.

Mortgage Legal Issues in New Jersey

New Jersey has mixed messages when it comes to how homebuyers are treated. While some tout that the state is “caveat emptor" or "buyer beware” due to a lack of codified law, others point to state court case rulings that favored homebuyers to prove the state is favorable to buyers. Whichever it may be, New Jersey realtors generally cover their bases by requiring sellers to fill out a detailed seller’s disclosure. Most sellers opt to fill it out to avoid future court cases as well as show transparency about the home’s condition.

New Jersey has had a few landmark cases which establish a few rules in real estate transactions. A seller in New Jersey has a duty to disclose all known, latent material conditions, and can’t avoid disclosure by selling a property “as is.” New Jersey law states that the home must be fit to live in. That said, homebuyers must complete their own due diligence on any potential purchase, which includes any home inspections and tests you deem necessary for the property.

New Jersey deals with another tricky topic, foreclosure, with the Fair Foreclosure Act which provides certain protections for homeowners. Originally enacted in 1995, the act outlines notice requirements and inclusions, timelines, the foreclosure complaint and further details. In December 2016, a bill was introduced to New Jersey’s State Legislature to revise the act, but no decision has been made as of yet. In the new bill, notice (which must be sent at least 30 days in advance of a residential foreclosure) cannot be sent more than 90 days in advance.

New Jersey is considered a judicial foreclosure state, which means lenders have to file with the court to initiate foreclosure proceedings. Court foreclosures are known for being lengthy, and it’s no exception in this state. The average foreclosure takes almost three and a half years in New Jersey.

Unfortunately, the Garden State is notorious for having the highest inventory of homes in foreclosure. The state also leads the nation in “zombie” foreclosures, where homeowners abandon a home before the foreclosure period is finished. This leaves the house to deteriorate, which drives down adjacent property values. Since the recession, numbers across the nation have dropped, but New Jersey is still the highest in the nation for its foreclosure rates. Factors behind the high rate are attributed to the recession, faulty mortgage lending practices, Hurricane Sandy and a high cost of living.

The good news is that New Jersey has a number of agencies to help at-risk homeowners. One of your first options is no-cost help through a local housing agency. You can find counselors through the National Foreclosure Mitigation Counseling Program (NFMC). Making Home Affordable (MHA) has programs including mortgage modification, refinance, principal reduction, repayment plans and more. Your NFMC counselor is trained to in these programs and will help you determine if you may qualify. In addition to counseling, you can also apply for New Jersey’s hardest hit fund which offers up to $50,000 in forgivable loans if you qualify.

New Jersey Mortgage Resources

You can find a number of programs and agencies helpful to homeowners and potential homebuyers in New Jersey. The first place to turn to is the New Jersey Housing and Mortgage Finance Agency (NJHMFA) which houses resources for first-time homebuyers, police, firemen and veteran homebuyers as well as programs for forgivable funding for down payments and/or closing costs. There are several programs designed to help homebuyers obtain 30-year fixed-rate loans. You’ll have to meet certain criteria to qualify, so it’s worth your time to read through the various offerings on NJHMFA’s website. While you’re there, you can also download a homebuying guide and find other helpful information for future homeownership.

While New Jersey does boast plenty of cities and suburbs, you’ll still find large swathes of land that are eligible for United States Department of Agriculture Rural Development loan programs. These programs can help you gain a mortgage for homes located in rural areas and can help if you can’t obtain financing through a traditional lender.

If you’re at risk for foreclosure due to a loss in income or from other financial hardships including medical, divorce, death or disability, you might qualify for New Jersey’s Hardest Hit Fund. These forgivable loans offer up to $50,000 in financial assistance.

Perhaps you’re thinking about retiring to this state. If so, it’s worth considering how retirement tax-friendly the state is. Whatever your plans, it’s always smart to look into all the factors that surround buying a home in a new location.