Property taxes are charged by city and county governments based on your home's assessed value, which local assessors determine on a regular cycle. Rates vary widely by state and even by county — some areas charge a small fraction of a percent of value, others charge well over that, and in a handful of high-tax states property taxes can rival the mortgage payment itself.
Property tax bills fund local services — schools, roads, emergency services — and are one of the ongoing costs of homeownership that continues for as long as you own the property, long after the mortgage itself is paid off.
How it works
The local assessor determines your home's assessed value, which may differ from its market value depending on your state's assessment rules and how recently a reassessment occurred. That assessed value is multiplied by the local tax rate to produce your annual bill.
If you escrow taxes and insurance, the lender collects a share of the annual bill with each mortgage payment and pays the county directly when due. If you don't escrow, you're responsible for paying the bill yourself — often twice a year, or quarterly in some states — directly to the taxing authority.
Many states offer exemptions that lower the taxable value for qualifying homeowners — a homestead exemption for a primary residence, additional exemptions for seniors or people with disabilities, and others that vary by state. These exemptions aren't automatic in most places; you typically have to apply after closing.
When it matters to you
Property tax matters every year, not just at closing — a reassessment or a local rate increase can raise your bill (and your escrow payment) even on a fixed-rate mortgage.
It matters right after you close too: many exemptions require you to apply, and missing the filing window can cost you a full year of savings you were otherwise entitled to.
Common mistakes
- Not applying for a homestead or other exemption after closing, leaving real savings unclaimed year after year.
- Assuming property taxes are fixed once you buy — assessed value and local rates can both rise over time.
- Budgeting only for the current year's tax bill without checking whether a reassessment is scheduled that could raise it.
- Not reading the annual escrow statement that shows exactly how much of your payment went to property taxes and whether the amount changed.
FAQs
What's a homestead exemption?
A homestead exemption reduces the taxable value of a primary residence in states that offer it, lowering the property tax bill. Rules and savings vary significantly by state, and you typically have to apply for it.
Why did my property tax bill go up even though my rate is fixed?
Your mortgage rate and the property tax rate are unrelated. A reassessment of your home's value or a change in the local tax rate can raise your bill independent of anything about your loan.
Do I pay property taxes directly or through my lender?
If you escrow, your lender collects a share of the annual bill with each mortgage payment and pays the county for you. If you don't escrow, you pay the taxing authority directly on your own schedule.