10 Tips for Tracking Property Taxes in Your Mortgage

Property taxes are an inevitable part of homeownership. While they are often overlooked, they play a significant role in determining the true cost of owning a home. For homeowners with a mortgage, property taxes are usually bundled into monthly payments along with the principal and interest. However, staying on top of property taxes can help you avoid surprises, save money, and ensure you're not caught off guard by tax assessments or potential errors in your mortgage payment. This article provides 10 valuable tips for effectively tracking property taxes in your mortgage.

Understanding Property Taxes in Your Mortgage

Before diving into the tips, it's important to understand how property taxes fit into your mortgage payment. Typically, when you have a mortgage, your lender may set up an escrow account to collect property taxes and homeowners insurance on your behalf. Each month, a portion of your mortgage payment is put into this escrow account, which the lender uses to pay your property taxes when they come due. This system ensures that taxes are paid on time and helps avoid late fees or penalties.

While this system works smoothly for many homeowners, it's important to actively track your property taxes to ensure that you're not overpaying or facing any unexpected increases. By staying vigilant, you can protect yourself from potential financial pitfalls.

Understand How Your Property Taxes Are Calculated

The first step in tracking property taxes is understanding how they are calculated. Property taxes are typically determined by the value of your home and the tax rate in your local jurisdiction. Property assessments are done periodically, usually every one or two years, and the value of your property is re-evaluated. Once the assessed value is determined, your local tax authority applies a tax rate to it to calculate your annual property tax bill.

To understand the specifics, you can:

• Review Your Local Tax Rate: Research the tax rate in your area. This rate may change from year to year, so keeping track of any adjustments can help you predict future tax increases.
• Understand Your Property's Assessed Value: Review how your property is assessed by local authorities. If your home value increases, your property tax bill will likely increase as well.

By understanding how property taxes are calculated, you can get a clearer picture of how much you are paying in taxes and whether there are any changes in your annual bill.

Track Your Property Tax Payments and Escrow Contributions

Once your property taxes are part of your mortgage payment, the next step is to monitor the amount you're paying. Your mortgage lender should provide you with annual statements that detail your escrow contributions, including the portion of your mortgage payment going toward property taxes.

Tips for tracking your escrow contributions:

• Review Your Mortgage Statements: Look for detailed information on the amounts being allocated to your escrow account. Ensure that the property tax amounts are correct and consistent with your local tax rates.
• Check for Escrow Shortages or Overages: Your lender may perform an annual escrow analysis. This process compares the actual cost of your property taxes and insurance to the amount collected through your mortgage payments. If your escrow balance is short, you may be asked to make up the difference or your monthly payment could increase.

By staying on top of your escrow account, you can catch any discrepancies early and avoid unexpected increases in your mortgage payments.

Set Up Alerts for Property Tax Due Dates

One of the easiest ways to track property taxes is to set up alerts for due dates. Depending on where you live, property taxes may be due once or twice a year. Missing a property tax payment can lead to penalties, interest, or even a tax lien on your property.

How to stay ahead of due dates:

• Use Your Lender's Notifications: Some lenders will send you notifications when property taxes are due or when they've paid them on your behalf. Make sure you're enrolled in these alerts.
• Set Up Reminders: Use a digital calendar or a task management app to set reminders a few weeks before your property tax due dates. This ensures that you'll be prepared, even if you're paying taxes directly rather than through an escrow account.

Staying on top of due dates will help you avoid any potential issues with your property taxes and maintain a good relationship with your local tax authority.

Monitor Changes in Local Tax Assessments

Local governments periodically reassess the value of properties to determine the amount of property taxes owed. It's important to keep an eye on these reassessments to ensure that your property is not being overvalued.

Ways to monitor property assessments:

• Review Assessment Notices: Every time your property is reassessed, you'll receive a notice from the local tax assessor. Be sure to read these notices carefully and check if your home's assessed value seems accurate.
• Compare with Neighboring Properties: Compare your property's assessed value with similar homes in your neighborhood. If there's a significant difference, it may be worth challenging the assessment.

If you feel that your property's value has been overestimated, you may be able to file an appeal to lower the assessment and reduce your property tax bill.

Consider Tax Deductions and Exemptions

In some cases, homeowners may be eligible for property tax deductions or exemptions. These can vary based on your age, income, disability status, or whether the property is used for specific purposes (such as a primary residence or agricultural land). Depending on where you live, you might qualify for:

• Homestead Exemptions: Many states offer exemptions for homeowners who use the property as their primary residence.
• Senior or Disabled Tax Exemptions: Some jurisdictions provide property tax reductions for seniors or individuals with disabilities.
• Energy-Efficient Property Tax Credits: If you've made energy-efficient improvements to your home, you may be eligible for tax credits that can offset your property taxes.

How to track these exemptions:

• Research Local Tax Benefits: Check with your local tax assessor's office to determine if there are any exemptions or deductions you may qualify for.
• Consult a Tax Professional: If you're unsure whether you're eligible for any property tax breaks, consult with a tax advisor who can help you navigate the process.

Taking advantage of property tax exemptions and deductions can significantly reduce your tax burden and help you save money in the long run.

Review Your Property Tax Bills for Errors

Mistakes happen, and your property tax bill could be wrong. Sometimes, clerical errors or incorrect property assessments can lead to an inflated tax bill. By reviewing your property tax bills carefully, you can identify potential errors before they become costly.

How to check for errors:

• Compare With Previous Bills: Compare your current tax bill to previous ones to spot any inconsistencies. Look for changes in assessed value, tax rates, or exemptions that may not have been properly applied.
• Verify Property Information: Ensure that the details about your property, such as the square footage and number of bedrooms, are accurate. Errors in property descriptions can affect your tax bill.

If you find any discrepancies, contact your local tax assessor's office to resolve the issue.

Use a Property Tax Estimator

If you're planning to purchase a home or refinance your mortgage, it's helpful to have an estimate of future property taxes. Many online tools allow you to estimate your potential property tax burden based on the location, size, and value of a property.

Using property tax estimators:

• Online Tools: Use tools provided by your county or local tax authority to estimate your future property tax payments. These tools take into account your home's value and the applicable tax rate in your area.
• Consult with Your Lender: If you're in the process of purchasing or refinancing a home, your lender may be able to provide an estimate of property taxes based on the location and your projected mortgage payment.

Using an estimator can help you get an idea of what your property tax obligations will be, allowing you to plan your finances more effectively.

Consider Refinancing to Lower Your Property Taxes

Refinancing your mortgage can be an opportunity to lower your property taxes, especially if you've recently made home improvements or if your home's market value has decreased. By refinancing, you may be able to lower the amount you owe in property taxes or adjust your mortgage terms to accommodate rising property taxes.

How refinancing affects property taxes:

• Lower Mortgage Payments: If your property value has decreased, refinancing may result in a lower mortgage payment and a smaller escrow contribution for property taxes.
• Reassess Property Value: In some cases, refinancing may prompt a reassessment of your property's value, which could reduce your property tax burden.

Before refinancing, make sure to weigh the costs and benefits of this option, especially if your primary goal is to reduce property taxes.

Plan for Future Tax Increases

Property taxes tend to rise over time, as local governments increase tax rates or reassess property values. By planning for potential increases, you can avoid financial strain in the future.

Tips for preparing for future tax increases:

• Monitor Local Tax Policies: Stay informed about any changes in tax laws or government policies that could affect property taxes in your area.
• Set Aside Extra Savings: Consider setting aside additional funds in a separate savings account to cover future property tax increases. This way, you can ensure you're prepared when your taxes go up.

Being proactive about potential tax increases will help you avoid surprises and ensure that you have the funds to cover your property taxes.

Consult a Tax Professional

If you find property tax tracking too complex or time-consuming, it may be worth consulting a tax professional. A tax advisor can help you understand your property tax obligations, identify potential savings, and ensure that you're paying the correct amount.

How a tax professional can assist:

• Property Tax Appeals: A tax professional can help you challenge a property assessment if you believe it's too high.
• Tax Planning: They can help you plan for future property tax increases and advise on potential deductions or exemptions you may be eligible for.
• Tax Filings: A professional can help ensure that your property taxes are properly accounted for in your overall tax filings.

Having an expert on your side can make managing property taxes much easier and more efficient.

Conclusion

Tracking property taxes in your mortgage is crucial for maintaining financial stability as a homeowner. By understanding how property taxes are calculated, staying on top of due dates, monitoring changes in assessments, and utilizing tools like property tax estimators, you can ensure that you're not caught off guard by rising taxes. Additionally, taking advantage of available exemptions, reviewing bills for errors, and planning for future tax increases will help you stay in control of your property tax obligations. With these tips, you can effectively manage your property taxes and avoid surprises down the road.

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