Some homebuyers find that their actual house payment is higher than what they were expecting. They find that their principal and interest portion are exactly what the lender quoted them, but their monthly tax impound is much higher than the original estimate. Usually when most people first sit down with a lender, they haven’t picked a home out yet, so the lender HAS to use an estimate since the property taxes aren’t known yet. Many lenders and title companies use 1.25% as a rule of thumb to approximate your tax bill. However, property taxes can vary greatly from town to town, neighborhood to neighborhood, and even within neighborhoods
Your property tax bill is broken into several different sections. First is the Countywide 1% Tax, which is 1% of your Assessed Value (which is usually initially set at the sales price when a property changes hands). Then you add in school bonds, city bonds and others. That is the total of your Ad Valorem Taxes. Then you add in Special Taxes and Assessments, which can be park assessments, Mello-Roos, etc. When you add all these amounts up, that is your total tax bill due for the year. If you divide that by your Assessed Value, you will get your Tax Rate.
For some older properties without many special assessments, the tax rate may be 1.25%. But newer homes with higher special assessments can be much higher. I’ve seen some in the low 2% range. So, if you bought a home with a 1.5-2% Tax Rate, and your lender estimated your payment based on 1.25%, that could be hundreds of dollars more per month.
Next week I’ll tell you how to calculate ahead of time what your tax bill will be if you bought a particular property, almost down to the penny. And it’s not that hard!
If you have questions about real estate, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free, go to: www.SharpHomesOnline.com. Sharp Realty. #01245186