What Mello-Roos and Other Special Assessments Mean To You And Your Clients

I hate you! April Fools, I love you and am always available to help you and your clients!

I sat down with some excited clients who’d fallen head over heels for a property they toured over the weekend on Christopher Lane. They were ready to make an offer until I pulled the tax roll and crunched the numbers. Their monthly payment was higher than they expected, and it was all due to the tax rate being 2.125% rather than the usual 1.25% -1.35%. It was a wake-up call for them, and these “hidden” costs - like special assessments, Mello-Roos taxes, and even insurance - can throw a wrench into a buyer’s budget.

Today, I want to unpack how these extra costs affect your monthly payment and your buying power. I’ll walk through some examples at different prices and show how much more house you could get with lower taxes.

What Are Special Assessments and Mello-Roos Taxes?

First, a quick rundown:

• Special assessments are additional taxes on your property bill to fund specific local projects - like fixing streets, building schools, or upgrading utilities.
• Mello-Roos taxes are a type of special assessment in California, often used in newer developments to pay for things like roads, parks, or fire stations.

We usually estimate property taxes at 1.25% when qualifying buyers, but special assessments can push that rate up - sometimes way up, like the 2.125% on Christopher Lane. And in my experience, it’s rare to find an area these days without some form of extra assessment.

The Payment Shock: A Real-Life Example

Let’s start with my clients’ situation. They wanted to stay below $800,000 because that is where they would feel comfortable on a payment and when they saw Christopher Lane, they were like “We found the property!”  At a standard 1.25% tax rate, their monthly payment (with today’s 5.875% interest rate, 0.45% insurance, and 0.70% PMI) would’ve been around $6,238. But with the 2.125% tax rate on Christopher Lane, it jumped to $6,829 - almost $600 more per month! I explained that for the same $6,829 payment, they could afford an $870,000 home with 1.25% taxes. That’s a big difference in house for the same budget.

Examples: Payments and Purchasing Power

Let’s look at three purchase prices - $800,000, $900,000, and $1,000,000 - with a 3.5% down payment, 0.45% insurance, 0.70% PMI, and a 5.875% interest rate. I’ll compare monthly payments with standard 1.25% taxes versus higher 2.125% taxes, then show how much more house you could buy with the lower rate for the same payment.

$800,000 = 6238.00 with 2.125% Property Taxes / $6238 = $865,000 with 1.25% Property Taxes

$900,000 = $7677 with 2.125% Property Taxes / $7667 = $972,000 with 1.25% Property Taxes

$1,000,000 = $8644 with 2.125% Property Taxes / $8644 = $1,090,000 with 1.25% Property Taxes

Higher taxes don’t just mean a bigger bill - they shrink how much home you can afford. For my clients, that $583 monthly jump meant losing out on a nicer kitchen or an extra bedroom unless they stretched their budget.

Insurance Costs: Another Piece of the Puzzle

I’ve kept insurance steady at 0.45% of the purchase price in these examples, but it’s worth noting that it can vary, too. A higher-value home or one in a wildfire-prone area might push that rate up, adding even more to your payment. For a $1,000,000 home, 0.45% means $375 monthly, but if it crept to 0.55%, that’s $458, and we have seen as much as $800 a month on a $1,000,000 property! Get your insurance quotes early on so we can figure out payments ASAP!

Need Help Crunching the Numbers?

We are a full-service mortgage company, and the first thing I do is pull the tax rolls for my clients to make sure the payment is what they want and can afford! The last thing we want is for someone to fall out of escrow due to not knowing their tax payment, which is a simple get! As for insurance, we can contact insurance agents and get a number early on! If you have a client eyeing a property and they want to know the real payment, including taxes and all the extras, please let me know! My job is to ensure that your buyer’s next home fits their wallets and wish list!

Please let me know if you have any questions or if a client needs my guidance. I’m just a call, text, or email away.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

But wait, there’s more…

Interest Rates

We are 15 basis points from being at the lowest level on interest rates since October 11th! We have a ways to go to get rates to the September 17th lows, but it’s starting to look good! Too bad tomorrow is a big day for tariffs, and we will see how the market reacts!

• We offer 12-day escrows for pre-approved buyers - Conventional/FHA/Jumbo/Bridge loans.
• We provide loans in all states, so call me with anything you need.
• Government Loans (FHA/VA/USDA) are in the 5’s and very low 6s.
• Conventional loans up to $806,500 are in the mid to high 6s.
• High Balance Loans from $806,501 to $1,209,750 are also in the mid to high 6’s.
• Jumbo loans above $1,209,750 are in the 6’s and 7’s.
• Bank statement loans are available with 10% down again, with larger down payments in the 6’s ++.
• Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement!
• 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000.
• Private Money lenders offer Hard Money Loans with 35% down.
• No Ratio Loans require 30% down.
• DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down.
• Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go!
• 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates!

Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits.

**Good News for Condos:**   –

Soltice North – They are now FHA approved and Fannie approved!

Canyon Park Carriage – Approved by Fannie Mae until 7/9/2025

Bella Ventana – Approved! YAY! They just got their insurance deductible corrected, so we sent the info to Fannie, and they have been removed from Fannie’s list and will be off my naughty list! By the way, this was spearheaded by a real estate agent that lives in BV!

**Bad News for Condos***

Las Ventanas – Insurance is the main culprit here!

Soltice South – They let their Fannie mae approval expire, therefore they are no longer fannie approved!

The full state of California naughty list has been added to MikeMeena.com! See the link below:

https://mikemeena.com/non-warrantable-condos/

Let me know if you hear anything new about condos or townhouses.

I am available every day if you need anything.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

Have a great day, and an even better tomorrow! Please call me when you have a client who needs to borrow!