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How Property Taxes Can Impact Your Mortgage Payment
Dated: January 20 2020
When buying a home, taxes are one of the expenses that can make a significant difference in your monthly payment. Do you know how much you might pay for property taxes in your state or local area?
When applying for a mortgage, you’ll see one of two acronyms in your paperwork, P&I or PITI, depending on if you are including your taxes in your mortgage payment.
P&I stands for Principal and Interest, and both are parts of your monthly mortgage payment that go toward paying off the loan you borrow. PITI stands for Principal, Interest, Taxes, and Insurance. Taxes and Insurance can be included in your payment, although, sometimes you can elect to pay those items directly. Either way, they are all important factors to calculate when you want to determine exactly what the cost of your new home will be.
According to TaxRates.org, property taxes are:
“A municipal tax levied by counties, cities, or special tax districts on most types of real estate - including homes, businesses, and parcels of land. The amount of property tax owed depends on the appraised fair market value of the property, as determined by the property tax assessor.”
Yavapai County Tax
We are fortunate in Yavapai County to have a user-friendly on-line system to be able to look up the property taxes for individual properties. If you are considering a house, and want to look up the amount of past property tax, simply enter the property address on the Yavapai County Interactive Map. http://gis.yavapai.us/v4/ Once you have the address displayed, you can select ‘Taxes’ from the right-hand column and view the taxes for the past 5 years. The Yavapai GIS System also displays assessed values and the amount of previous sales.
Below is a map from Taxrates.org that shows the annual property taxes by state (including the District of Columbia), from lowest to highest, as a percentage of median home value. According to SmartAsset.com, the average Yavapai County tax rate is 0.616%. That means that a home in Yavapai County that has a $250,000 assessed value, would have approximately $1,540 in annual property tax.
The top 5 states with the highest median property taxes are
- New Jersey (1.89%)
- New Hampshire (1.86%)
- Texas (1.81%)
- Nebraska (1.76%)
- Wisconsin (1.76%)
The states with the lowest median property taxes are
- Louisiana (.18%)
- Hawaii (.26%)
- Alabama (.33%)
- Delaware (.43%)
- District of Columbia (.46%)
When you are considering a home, it is helpful to note that as payments are made, the P & I portion of your loan will decrease over time. The amount of your Insurance premium and Property Taxes will not. Paying attention to the amount of taxes is good due diligence to make sure you know what financial obligations lie ahead.
If you are ready to take the next step and run some numbers on your next home, give me a call at (928) 916-1921. I would be happy to walk you through the process and help you understand the big picture of buying a home.