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Understanding Property Taxes
Property taxes typically do not top the list for the most exciting part about buying real estate, but they are a necessary part of this kind of investing. Understanding property taxes is key in owning a home, buying and selling real estate, and building your real estate portfolio. This is a basic guide on everything you need to know about property taxes:
What are property taxes?
Property taxes are taxes paid by the owner of a home to the local government. The amount paid is based on the value of the home and the land the house sits on. While the county typically imposes property taxes, the money collected usually goes to local schools, the city government, or local authorities. The guidelines and regulations for property taxes vary significantly depending on where you live and buy.
How To Budget For Property Taxes
Many home buyers, especially first-time home buyers, are surprised to find out how many extra costs are associated with buying a home above and beyond the purchase price. Before you make an offer on your home, it is in your best interest to research the property taxes in your area. This will allow you to account for things like unexpected reassessments that will result in tax hikes, supplemental role adjustments in the first year of ownership and the possibility of higher tax rates in the second and third year of homeownership. If this all sounds unfamiliar to you, it is important to educate yourself on your area specific property tax laws so that you can budget accordingly.
Ask The Right Questions
When it comes to factoring in property taxes to your home buying budget, there are a few questions you should ask:
Is my home subject to various property tax authorities?
Sometimes, homeowners are responsible for paying more than just state property taxes. Ask questions about what local and county property taxes you are responsible for, along with other authorities that may require you to pay tax, such as sewer or water authorities, school districts, and local water authorities.
What things will cause my property taxes to rise?
One of the most common reasons a homeowner notice is a rise in their property taxes is that the home has been reassessed. If you plan to remodel your home, there is a good chance that your home will be re-evaluated after the upgrades and property taxes will increase. Renovations that increase the value of your home will also increase the amount of property taxes that you pay.
Set Yourself Up For Success
Many lenders require home buyers to set up an escrow account to secure the funds for property taxes. A lender will determine the total amount of property taxes for the year, and the homeowner will pay off this total monthly. The money will be set aside and use for things like property taxes, insurance, and other home buying responsibilities. The danger in this type of setup is that some loan officers may forget to apply the money you paid towards your property taxes, and you may find yourself in a delinquent situation.
Look Into Property Tax Assistance
In some cases, home buyers find that paying property taxes creates a significant financial burden. In these instances, there are government programs and plans set up to ease the financial burden of property taxes. This relief could come in many forms, including deferral programs, tax caps, and homestead exemptions. These relief programs are designed to help low-income families, and seniors buy a home.
Need More Help? Contact Jovi Realty
Property taxes can be an overwhelming part of the homebuying process, but you do not have to navigate it alone. Contact Jovi Realty today to work with our knowledgeable real estate team. We can connect you with taxing professionals who can help break down the property tax process and help you feel confident about what taxes you are paying and why. Contact the experienced Realtors at Jovi Realty today!