Property taxes are a significant part of homeownership, directly influencing your monthly expenses and long-term financial planning. Here’s what homeowners need to know about how these taxes are calculated, collected and paid-especially when a mortgage is involved.
Property taxes are determined by multiplying your home’s assessed value by the local tax rate. The assessed value is set by a government assessor and may differ from your home’s market value. Local governments set the tax rate, often expressed per $1,000 of assessed value and this rate can change annually based on budgets and revenue needs. Exemptions or deductions, such as those for primary residences or veterans, can reduce your taxable value.
For most homeowners with a mortgage, property taxes are paid through an escrow account managed by the lender. Here’s how it works: your lender estimates your annual property tax bill, divides it by 12 and adds that amount to your monthly mortgage payment. Each month, the lender deposits this portion into your escrow account. When your property tax bill is due, the lender pays it directly from this account, ensuring timely payments and helping you avoid large lump-sum bills.
This system is especially common if your down payment was less than 20% or if you have a government-backed loan (like FHA or VA). In some cases, if you have significant equity, you may be allowed to pay property taxes directly instead of through escrow.
Contact one of our Mortgage Representatives today to assist you in meeting your homeownership goals!
Opinions expressed above are the personal opinions of the author and meant for illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Terms, qualifications and other restrictions apply. Member FDIC, Equal Housing Lender, RCB Bank NMLS #798151.
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