It can be confusing enough using a mortgage calculator to figure out the best loan options and what your monthly payment will be. What you might overlook in all those equations is the property tax. The difference between two homes priced at the same loan rate, one with a 2.15% property tax rate and the other at 2.35%, you may not realize the true cost of that property tax over the life of the home.
The first thing to be aware of is that property taxes are not limited to the length of the mortgage. As long as you own the home — even if you’ve paid off the mortgage — the tax to your local government is your responsibility. Property taxes are also based on the appraised value of the home, not the value of your mortgage. While investing a large downpayment is a good idea to save on interest, no matter what you owe on your home, you’ll still be paying property taxes based on the assessed value of the home.
So, what’s the difference between two homes in neighboring towns or cities, priced exactly the same, but with slightly varying property tax rates? It could mean thousands of dollars.
When making a decision on where to buy a home, you should consider the property tax as part of the overall cost. While the percentage difference might seem very small on the surface, don’t forget that your property tax bill is calculated by multiplying the rate for every one thousand dollars of the home’s assessment.
What does that look like? On a home assessed at $250,000, you’d pay about $5,500 a year with a property tax rate of 2.2%. But the tax bill jumps to $6,325 in a town with a 2.53% tax rate. Assuming the rate is not cut, add that expense year after year after year.
Property taxes pay for local services and programs in the town where you live, including public safety, road maintenance, sanitation, and public schools. While you’re searching for a home, consider whether you can take advantage of better quality services in a neighboring town without paying the higher tax rate. For instance, if a town with a lower tax rate is more affordable, you might have the opportunity to send your children to better-ranked, regional public schools.
If a regional school isn’t an option, what about private school? The cost of tuition might not be out of range if you consider the benefit of choosing a town with a lower tax rate.
On the other hand, homeowners value the services they receive for the tax rates they pay. Maybe they’d rather have their trash collected than have to go to the town dump. Some prefer access to city water instead of septic. And a fire department made up of permanent, full-time employees can make residents feel more secure than a volunteer department.
No matter where you think you’d feel most at home, we have many options in several communities and are happy to show you around!