When you're shopping for a new home, the photos and listing price generally capture your attention first. But savvy shoppers know there's another factor to consider—property taxes.

Whether you're just beginning the buying journey or ready to make your move, it's essential to look beyond the sticker price and understand how property taxes impact the bottom line. Before diving into strategies for managing property taxes, it’s important to first understand the basics.

How Are Property Taxes Calculated?

Property taxes are generally calculated by multiplying the property's assessed value by the tax rate set by your local government.

To determine value, assessors may use one of these methods:

• Sales evaluation: Comparing your home against others in the area.
• Cost method: Determining how much it would cost to replace your property if it was destroyed.
• Income method: Estimating the property’s income-generating potential.

To determine tax rates, the local government generally assesses its budget needs for the year. Then, a tax rate will be set based on those needs, factoring in the total value of taxable properties.

What Are Property Taxes Used For?

Property taxes typically support:

• Local schools
• Libraries
• Public safety departments
• Local government
• Other community services like sanitation and snow removal

Are Property Taxes Included In My Mortgage?

Property tax payment schedules typically vary depending on whether you have a mortgage or own your home outright.

• If you are making payments, the lender collects payment for your property taxes, rolling it into your monthly mortgage.
• If you own your property outright, you must pay your property taxes on your own, generally altogether or divided into semi-annual or quarterly payments. This approach requires careful budgeting. Using a mortgage property tax calculator can help you estimate how much you'll need to set aside.

Is It Better to Pay Property Tax With a Mortgage?

In most cases, lenders bundle your monthly mortgage payment and property tax payment together. This is not only convenient but it also:

• Spreads out your tax burden over the course of 12 months, which means you chip away at it rather than having to save for one big annual bill.
• Offers more peace of mind because you don’t have to worry about saving for a large bill.
• Ensures your taxes are always paid on time—without late fees or extra interest.

Can I Choose to Pay My Own Property Taxes?

If you own your home outright or your lender allows you to pay property taxes outside of your monthly mortgage, you may have this option. Paying your own property taxes can offer several advantages:

• More control over your cash flow: This can be advantageous for those who want to use that money for short-term investments.
• Fewer escrow surprises: When you bundle your taxes and mortgage, your lender estimates the amount and adjusts your monthly payments if taxes change. Handing taxes on your own means less risk of escrow shortages.
• Flexibility in tax payments: You have more control over when and how you pay your property taxes.

JustChoice: The Local Lender You Can Trust

Thinking about purchasing your dream home or have questions about taxes, loan types, or financing options? We’re here to help. As a local-first, non-commission-based lender, we’re dedicated to guiding you every step of the way. From finding the right loan to closing the deal, our team provides the expertise you need and the personal attention you deserve. Contact us today!