When budgeting to buy a home, there are more costs to consider other than your mortgage payment. While you should be able to comfortably afford your monthly obligation, make sure to plan for factors such as maintenance, insurance and property taxes. Depending on where you live, these expenses can be substantial.
Your property tax dollars are required to support the community in which you live. They pay for things like roads, schools and local government organizations. Luckily, with a little research, you can figure out exactly what you’ll pay and plan for your upcoming responsibilities.
How are Taxes Determined?
The rate at which your property taxes increase or decrease depends on when local officials assess your home. Experts at Investopedia suggest it can occur between every one and five years. A licensed assessor will deem a reasonable market value for your home based on local real estate market conditions, the integrity of the home and prices of comparable properties. Once this total is calculated, it is then multiplied by a tax rate set by your municipality. Beneficiaries of property-tax dollars use their own system to calculate their share of the taxes. An easy way to find out the annual or biannual fees you will be responsible for is to analyze an area’s tax rate and multiply it by the home’s assessed value.
Dealing with Tax Hikes
During each assessment, it’s common for property taxes to increase. This can occur due to home improvement projects that add value to your home, or an increase in property values in your area.
The tax rate also can be increased due to new legislation or school or emergency service upgrades. Fortunately, most counties offer their residents a chance to contest rising costs by appealing the assessment of the property. Keep in mind that your local regulators may have strict time restrictions of when the issue must be addressed.
If your case is unable to be resolved with the assessment board, in many states, the next phase will be in front of a judge. Be sure to do your homework before contesting. Most tax expenses are public records that you can easily access with a little research.
Build Your Savings
When searching for homes that meet your budget, considering the cost of property taxes is crucial. Make sure you can comfortably afford the initial expense and have room in your savings to prepare for increases. Buying a new house is an investment that’s best ventured when you’re financially stable.
According to the Investor Education Foundation, an established emergency savings plan should cover three to six months worth of realistic living expenses. Having this surplus of money can help lessen the impact you feel when your new home requires maintenance or property taxes increase suddenly.
The Foundation also suggests using a liquid account to store your savings. This type of plan is easily accessible so you can handle emergencies without lengthy processing through your lender. Ask the experts at your chosen financial institution about interest-generating accounts to help your savings grow.
If you are ready to buy, you may want to contact one of our real estate attorneys for more information. We will be happy to meet with you and share our guidance. Schedule an appointment today. Call us at 888-670- 6791.