When you own a home, you’re responsible for the associated property taxes. These property taxes are based on the assessed value of your home (and the land it sits on) and are generally levied by your local and state government to fund schools, local amenities, and other special projects or programs.
Many mortgage payments include property taxes, so it’s essential to use a mortgage calculator with taxes included when estimating your loan terms and costs.
Property Taxes and Mortgage Payments
Federal Housing Administration (FHA) loans, which are widely popular with first-time home buyers, and USDA loans require an escrow account to hold property taxes. Conventional and VA (partially backed, or guaranteed, by the Department of Veterans Affairs) loans do not require an escrow account, but your lender could still require it if you put less than 20% down.
If your property taxes are held in escrow, the total amount of your annual property taxes will be divided by 12 and added to your monthly mortgage payment. This money is held until the taxes are due — at which time your lender will pay them from your escrow account. If your loan does not require that property taxes are collected in advance, you will pay them directly to your local jurisdiction.
Property taxes are calculated by taking the assessed value of the property — including the land and structures — and multiplying it by the mill rate (or tax rate) in your area. The assessed value of your home is typically reassessed every one to five years. Fortunately, listings on Movoto by OJO will show you the current property taxes so you do not need to calculate them yourself.
Keep in mind that if you purchase a new home in the middle of the year, the property tax responsibilities are passed from the previous owner to the buyer. Each party will take on a portion of the year’s total based on your closing date.
Where to Find Information About Taxes
If you’re using an online mortgage calculator to estimate your payments, be sure to check that property taxes are included. Most robust calculators will ask for the property’s ZIP code or location to estimate the taxes for that area based on the county’s current tax rates.
You can also contact the county’s tax collectors office. The website will typically allow you to type in a home’s address and receive information on how much the property taxes have cost over the years. The IRS also provides information about property tax rates across the country.
4 Benefits of Using a Mortgage Calculator With Taxes
Here are just a few of the benefits that you can expect when using a mortgage calculator with taxes included:
1. You’ll be able to compare the true cost of listings
Since property tax rates can vary by location, when shopping for homes, you’ll be able to compare the property tax between listings to better grasp the true cost of the home.
2. You’ll get a full picture of your loan
In addition to the principal (or the amount you’re borrowing), your mortgage payment will include interest, taxes, and insurance. If you do not use a mortgage calculator that includes taxes, you’ll leave out an important piece of the calculation.
3. You’ll see how tax impacts your monthly payment
Using a mortgage calculator with taxes will allow you to see how different tax rates and amounts impact your monthly payment.
4. You’ll gain a better understanding of your responsibilities
It’s essential to grasp the full financial responsibility associated with buying a home — and property taxes are part of homeownership.
Start Your Home Search Today
Take ownership of your mortgage by gaining a thorough understanding of your upcoming home loan. The Movoto mortgage calculator will ask you for your ZIP code, which is used to estimate the property taxes for you. And, when you’re ready to start your home search, begin online with our home search portal.
