First Time Homebuyer Tips Explaining Property Tax Payment Options
As a first time homebuyer, the prospect of having to pay property taxes may seem a bit foreign at first. Unlike your days as a renter, when all you had to do was cut a check every month, the financial responsibilities of a first time homebuyer are much more involved.
However, when it comes to property taxes, there are plenty of resources for first time homebuyers to follow to ensure the process isn’t as overwhelming as it appears. Knowing what property taxes are, and how they are paid, is a good first step for any first time homebuyer.
Why Do I Pay Property Taxes?
Property tax, which all homeowners must pay, is defined as a “tax assessed on real estate by the local government.” In essence, property taxes are how local governments are funded. They ensure services provided by municipal departments such as public works, police, fire and schools are operational throughout the year. They are the reasons roads get paved and plowed, and why government infrastructure is constructed and improved upon.
The amount a homeowner pays in property taxes is determined by the value of your property—which includes not only your home, but also your land. The property tax you pay is also heavily influenced by the property tax rate (aka mill rate) in your community.
Most home mortgage loans include a provision that requires the loan holder to pay property taxes when they are due. In the event that they aren’t paid, a loan company considers the loan holder to be in default—and in extreme cases could end up foreclosing on the property.
How Do I Pay Property Taxes?
A first time homebuyer can arrange their mortgage loan in such a fashion that the property taxes they owe are essentially woven within their mortgage payment each month. The amount owed for tax purposes is typically put in an escrow account, and then paid to the municipality when due. Many lenders prefer to do this because it assures that the taxes are paid and therefore protects their investment. This also comes as a benefit to a homeowner because they then don’t have to worry about paying the taxes themselves when they are due.
For homeowners who no longer have a mortgage, a tax bill will be sent to their home and they are then responsible for making the payments. These taxes can be mailed or paid in person to the designated municipal department—which more often than not is the Assessors Office or Tax Collector. Ultimately, the rules that apply to how and when a homeowner pays property taxes can vary widely from state to state and community to community—so be sure to do some research first.
At Blue Water Mortgage, we’re constantly coming up with ways to make home ownership that much easier for a first-time homeowner. Our mortgage professionals have come up with some great tips and tools on how to navigate the mortgage application process, as well as what to expect after closing on a mortgage. If you have any questions concerning your new home property taxes—or anything to do with home ownership—please contact us. We’re always happy to help!