How do Property Taxes Affect My Mortgage Payments?

Whether you’re considering buying a home or are already a homeowner, property taxes are a major factor to think about when it comes to your mortgage.

Property taxes are calculated by the county property appraiser’s office to determine the assessed value of the house. Your taxes will be directly tied to the assessed value of the home. The lower the value, the lower your taxes will be, and vice versa. If the neighborhood is located in a desirable school district or near a public service, the taxes will usually be a bit higher as a way to fund the programs. Cities will often hold votes on whether or not to raise the taxes when more funds are required.

Many homeowners don’t have to worry about personally paying taxes “out of pocket” every year since each month when you pay your mortgage it includes a small monthly payment that goes into an escrow account, to be taken at a later date when the taxes are due. Sometimes taxes are raised which causes the monthly escrow payment to also get higher.

More details

A good thing to know is that while the sale of a home would trigger a reassessment of the property, refinancing a loan will not have the same effect. The property taxes usually will not change as it does not require an assessment like a sale might. Most lenders will instead require an appraisal of the home. An appraisal is similar to an assessment in some ways. The main difference however is that an appraisal is used solely for the lender to ensure that they are not loaning out more money than the home is worth. It will not be used to raise property taxes. New homeowners may be surprised when tax season rolls around, and they find their escrow payment has changed. Considering many new homeowners have previously rented, it’s no surprise that they may feel a bit blindsided when learning more about what is expected of them when it comes to property taxes. When renting an apartment or office space, there are no property taxes required from you. But as we know this is not the case when you own a home.

Don’t get caught off guard

New homeowners may be surprised by an increase, but this is not abnormal as property taxes increase/decrease regularly and this will always affect your monthly payment. This can also happen when there is a miscalculation in the initial assessment of the property value or if the assessment changes. The assessment can change when improvements are made to the home or even if the home sustains any damages. There are always more things you can learn about the property taxes you pay, but it is great to at least have some basic knowledge on how these things work, considering we will always be paying them.

As tax bills are about to show up in your mailboxes soon, it is the perfect time to contact us to discuss your options. Click here to get started.