Purchasing a new home is an exciting milestone,but it also comes with various financial responsibilities,including property taxes.Property taxes are a significant consideration for homeowners,as they contribute to funding local government services and infrastructure.Understanding when and how property taxes are assessed and paid is essential for new homeowners.We will explore when you start paying property taxes on a new home and the factors that influence the timing of these payments.
Assessment Period and Tax Calendar
Property taxes are assessed on an annual basis,typically by the local government or taxing authority.The assessment period and tax calendar may vary depending on your location,as different jurisdictions follow different timelines.In general,the assessment period determines the timeframe during which the value of your property is evaluated for taxation purposes.
Assessment and Valuation
Before property taxes can be determined,the value of your new home must be assessed.Property assessment is usually performed by the local assessor's office or a designated assessment agency.The assessment process involves evaluating various factors,such as the property's size,location,features,and recent comparable sales in the area.
The assessment may occur shortly after the purchase of a new home,or it may take place annually,depending on local regulations.Once the assessment is completed,the value of the property is established,and the taxing authority uses this value to calculate the property taxes owed.
Escrow Accounts and Property Tax Payments
When you purchase a new home with a mortgage loan,you may have an escrow account set up by your lender.An escrow account is a dedicated account held by the lender to collect and distribute funds for property-related expenses,including property taxes and insurance premiums.This account helps homeowners budget for these expenses by spreading the payments over time.
If you have an escrow account,your property tax payments will be included in your monthly mortgage payment.The lender will estimate the annual property tax amount and divide it into monthly installments.These funds will be held in the escrow account until the property tax payment is due.When the tax bill arrives,your lender will use the funds in the escrow account to make the payment on your behalf.
Timing of Property Tax Payments
The timing of your property tax payments will depend on several factors,including the local tax calendar,the closing date of your home purchase,and your mortgage payment schedule.Here are some common scenarios:
Pro-Rated Taxes at Closing:If you purchase a new home and close the sale during the assessment period,you may be responsible for a pro-rated share of the property taxes.The seller will pay the taxes up until the closing date,and you will reimburse them for the portion that covers your ownership period.
Prepaid Taxes:In some cases,the seller may have already prepaid the property taxes for the entire year.If this is the case,you may need to reimburse the seller for the portion of the taxes that apply to your ownership period.This reimbursement will be reflected in the closing costs.
First-Year Escrow Account:If you have an escrow account established for your mortgage,your lender will typically set up the account when you close on your new home.As part of the escrow account setup,your lender will collect an initial amount to cover the upcoming property tax payment.This ensures that sufficient funds are available when the tax bill is due.
Annual Property Tax Cycle:Once the property tax assessment is complete,and the tax calendar year begins,property tax bills are typically issued by the local taxing authority.The specific due dates for property tax payments will vary by jurisdiction.In some cases,the tax bill may be issued in the latter part of the year,and the payment may be due the following year.
Ongoing Property Tax Payments:After the initial year,property taxes are usually paid on an annual or semi-annual basis,depending on the local tax calendar.If you have an escrow account,your lender will continue to collect monthly installments to cover the next year's property tax payment.