Will Higher Values Mean Higher Taxes?
Will Higher Values Mean Higher Taxes?
As home values rise, some homeowners may want to brace themselves for a potentially shocking property tax bill, housing experts warn. The magnitude and timing will vary. But property taxes are expected to rise by hundreds of dollars in many areas, even in states such as California and Texas that have laws limiting year-over-year increases.
Property taxes don’t always stay in sync with home price increases, however. “An increase in value does not necessarily mean that the next year’s property taxes will increase at a proportionate rate,” Lee Pierce, senior vice president of lending for Seattle Credit Union, told NerdWallet.
Median existing-home prices have climbed by 13.3% in September compared to a year ago, according to the National Association of REALTORS®.
But even in states that try to shield homeowners from hefty increases in property taxes, owners may still see a higher bill. Eighteen states and the District of Columbia limit how much property tax assessments can rise each year. The caps vary. In California, the assessed value can increase by a maximum of 2%, while in Texas, the maximum increase is 10%.
Homeowners who pay property taxes via an escrow account on a mortgage typically receive an escrow account disclosure from the loan servicers early each year, NerdWallet explains. The statement will include the expected annual cost of property taxes, homeowners insurance, and mortgage insurance if applicable. If the servicer is unable to cover the tax bill from an existing escrow account, they will have the homeowner pay the difference.
Homeowners can instruct their lenders to withhold more each month in their escrow account to avoid potential shortfalls if they believe their property taxes are likely to rise.
Source:
©National Association of REALTORS®
Reprinted with permission
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