When planning for homeownership, it’s easy to focus on things like your monthly mortgage payment, interest rate, and down payment. But there’s another important cost that often gets overlooked: property taxes.

Property taxes are a regular part of owning a home, and understanding how they work can help you budget more confidently and avoid surprises down the road. Here’s what every homebuyer (and homeowner) should know about property taxes.

What Are Property Taxes?
Property taxes are local taxes paid by homeowners based on the value of their property. These taxes help fund community services, like schools, roads, fire and police departments along with other public resources.

The amount you pay in property taxes can vary depending on where you live, since tax rates are set at the local level and differ by county, city and even school district. So be sure to check the rate in your local area to figure out how much you’ll be paying.

Who Determines Property Taxes?
The property tax rate is influenced by a few different factors. County assessors contribute to figuring out how much you’ll be paying, based on identifying the value of your home. Local governments and taxing districts set tax rates based on their budgets too. These could be counties, cities and school districts, who each have their own needs and their own policies related to property taxes.

Your total bill is typically made up of several taxes combined.

How Are Property Taxes Calculated?
Property taxes are generally calculated based on two different components. The first is the assessed value of the home. This is the value your local assessor assigned to your property. It can differ from the market value of your home, and it may be adjusted from time to time.

Also, the tax rate (or Mill Rate) is applied to your assessed value and helps determine how much you owe.

Together, these two factors come into play with regard to your tax bill.

When Do You Pay Property Taxes?
Property taxes are typically billed annually, though many homeowners pay them in installments or through an escrow account.

With an escrow account, your lender can collect a portion of the taxes you owe on the property each month as part of your mortgage payment. This makes budgeting easier, and helps ensure payments are made on time. It can also help you be prepared to satisfy what you owe on your bill by putting money aside in advance.

Why Do Property Taxes Change?
Changes in your home’s assessed value, local rate adjustments, new schools or public projects and home improvements or renovations can impact your tax rate. It’s normal for the amount you pay to change over time. Since rates and assessments are handled at the local level, even nearby homes can pay different amounts.

Are There Ways To Lower Property Taxes?
Some homeowners may qualify for property tax exemptions or relief programs, which can reduce the taxable value of their home. These programs vary by location. Be sure to check for exemptions offered in your area. For instance, homestead exemptions can be filed for primary residences which can lower your rate. Senior, veteran or disability exemptions can also be utilized along with income-based relief programs. Your local assessor can tell you what programs are available where you live, since these programs depend on your location.

Why Does Property Tax Matter For Your Mortgage?
Simply put: Your property tax rate can play a big role in the total cost of homeownership that you need to account for, and your tax rate can be used when identifying how much home you can realistically afford. Understanding how they work ahead of time can help you plan a realistic budget, avoid surprises after closing and feel more confident about your mortgage decision.

Property taxes don’t have to be a complicated subject and you don’t have to figure them out all on your own. At AmeriHome Mortgage, our highly trained Home Loan Experts can help walk you through and understand the full picture of homeownership and the various costs associated with it.

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