Our team often gets asked, “What are some of the local costs associated with purchasing that aren’t the norm in other parts of California?” Although there are a few “special fees” found in certain areas, probably the most prevalent, additional cost in our area is Mello-Roos.
Mello-Roos was created in 1982 as a way for communities to fund library’s, fire, police, and other community expenses. Because it did not go into effect until 1982, older, more established areas, such as the bay area, do not have a lot of developments with Mello Roos. Mello Roos is added to the county tax bill. In Roseville, Rocklin, Lincoln and a few other communities, we have developments where Mello Roos can add as much as $400 per month to the tax bill. That obviously is a big hit for any buyer. When our team speaks with out of area buyers, we always point out that not all of our housing has a special Mello-Roos tax, however; over 90% of the newer housing developments in the past twenty years do have some additional Mello-Roos tax.
With interest rates so low, it may behoove you to look at slightly older neighborhoods that do not have Mello-Roos. Why?
Using the example of $400 per month additional Mello-Roos tax…with a fixed interest rate loan of 3%, fixed over 30 years, a buyer can finance approximately $95,000 more in a purchase for that $400- should they purchase a home without Mello-Roos. That is a substantial amount of purchasing power. Of course, not all properties with Mello-Roos have a high monthly like this example. However, it is worth investigating the Mello-Roos cost before you go home shopping.
The information above is intended to serve as an “information only” article. Please refer all tax questions to your tax and/or legal specialist.