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Property Tax

Real estate property tax is assessed by local governments such as cities, townships, counties, parishes and boroughs and is the primary source of income for communities. The majority of state property tax is used for education, while remaining funds are used for county and municipality expenses such as paying government employee salaries, road repairs and improvements to infrastructure.

Mortgage lenders calculate property tax by multiplying the tax rate times the property value. When borrowers buy houses, a property appraiser assesses the value of the real estate based on several factors. The appraised value can be higher or lower than the purchase amount. When buying a house, the goal is to purchase the property for less than the appraised value.

Most lenders include property taxes in the home mortgage loan and establish an escrow account to pay future tax bills. Loan documents should reflect the amount contributed to escrow from monthly payments.

When mortgage lenders do not include property taxes in the loan, or when homeowners own the property outright, property taxes must be paid directly to the county tax assessor's office. If borrowers do not pay their real estate tax bill, lenders can claim default on the loan and commence with foreclosure action.

If the real estate is owned outright and property owners do not pay taxes, the tax assessor's office will issue a lien against the property. Tax liens remain in place until paid in full. Property owners cannot sell or transfer real estate when liens are attached unless the buyer opts to pay past due taxes to have liens removed.

Real estate taxes can increase or decrease over time. Much depends on economic stability of the community and property appraisals. Many residents living in communities hit hard by foreclosures have also been hit hard by property tax increases.

In order to maintain or improve current levels of education, infrastructure and community protection services such as fire fighters and police officers, property owners end up paying more when their neighbors are unable to make good on their mortgage note.

If you are considering buying a home it is important to calculate property tax and determine the true costs of home ownership. Other considerations include homeowner's insurance and association dues, as well as overall maintenance or renovation costs.

Buying a home is one of the biggest decisions you will ever make. Don't place yourself at risk for foreclosure because you didn't plan for unexpected expenses. We invite you to learn more about the advantages and disadvantages of home ownership in our real estate and property tax library.

We cover a wide range of topics including buying and selling real estate, investment properties, how to avoid foreclosure, tips for finding the best home mortgage loan and much more. We publish new articles each week and encourage you to subscribe to our mailing list so you don't miss any updates.

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Published on December 26, 2009 at 03:14 AM

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