Mortgage Management For Dummies
Book image
Explore Book Buy On Amazon
Why do we pay property taxes? That’s something most homeowners ponder at one point or another. As you’re already painfully aware if you’re a homeowner now, you must pay property taxes to your local government. The property taxes are generally paid to a division typically called the County or Town Tax Collector.

Property taxes are typically based on the value of a property. Because property taxes vary from one locality to another, call the relevant local tax collector’s office to determine the exact rate in your area. (Check the government section of your local phone directory to find the phone number or search for the name of the municipality and “property tax” online.)

What are property taxes due? It varies from state to state. Check with your state’s treasury department to determine when property taxes are due for your particular location. Typically, you will be given the option to pay online or by check via mail.

Always check with your state to determine the proper method of payment and the due dates.

In addition to inquiring about the property tax rate in the town where you’re contemplating buying a home, also ask what additional fees and assessments may apply. In California, many recently developed areas have special assessments (such as Mello-Roos districts), which are additional property taxes to pay for enhanced infrastructure and amenities, such as parks, police/fire stations, golf courses, and landscaped medians.

If you make a smaller down payment — less than 20 percent of the home’s purchase price — your lender is likely to require you to have an impound account (also called an escrow account or reserve account).

Such an account requires you to pay a monthly pro-rata portion of your annual property taxes, and often your homeowners insurance, to the lender each month along with your mortgage payment. The lender is responsible for making the necessary property tax and insurance payments to the appropriate agencies on your behalf. An impound account keeps the homeowner from getting hit with a large annual property tax bill.

As you shop for a home, be aware that real estate listings frequently contain information regarding the amount the current property owner is currently paying in taxes. These taxes are often based on an outdated, much lower property valuation. If you purchase the home, your property taxes may be significantly higher based on the price that you pay for the property. Conversely, if you happen to buy a home that has decreased in value since it was purchased, you could find that your property taxes are actually lower.

About This Article

This article is from the book:

About the book authors:

Eric Tyson, MBA, is a financial counselor and the bestselling author of Investing For Dummies, Personal Finance For Dummies, and Home Buying Kit For Dummies.

Robert S. Griswold, MSBA, is a successful real estate investor, hands-on property manager, and the author of Property Management Kit For Dummies.

This article can be found in the category: