First Time Home Buyers | What You Need To Know About Property Taxes

What you need to know about property taxes | Smith & Co

Before you put a bid on your “affordable” dream home, you have to take into consideration an important factor that can drastically change the affordability of a home: the property taxes.

 

What are property taxes?

A property tax (or millage tax) is a levy on property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located. Property taxes are based upon the location and the specific home’s value.

 

For first time home buyers: here is important information about property taxes you need to know and how that number coincides with the value, as well as monthly payment, of the home.

 

  • Local governments use property tax revenue for funding programs such as education, emergency services, transportation, libraries, parks and infrastructures.
  • Property taxes are a major cost for homeowners and are paid yearly either in a lump sum or the cost is divided to be included in 12 monthly mortgage payments.
  • The tax rate is a flat rate percentage based upon the value of the property.
  • Various levels of governments are allowed to collect property taxes. This includes states, counties, school districts, and special districts.
  • A licensed tax assessor will use market data, previous sale prices and neighborhood desirability to determine the value of a home, which determines the amount of property tax to be paid.
  • Property taxes can be raised by governments each year when support for funding is needed.
  • Home improvements can increase the value of a home and thus, increasing the property taxes. Homeowners need to ensure that the amount of money put in and the amount of taxes to pay will be received back with the revenue from a future sale.