Buying a Home December 11, 2023

How Property Taxes Can Impact Your Mortgage Payment

When you become a homeowner, you are also responsible for paying property taxes. These taxes can take a significant chunk out of your finances, and it’s essential to understand their impact on your mortgage payment. Property tax is a recurring expense and can affect the affordability of your home, especially if you’re purchasing in an area where rates are high. 


When applying for a mortgage, you’ll see one of two acronyms in your paperwork, P&I or PITI, depending on whether you include 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 the cost of your new home.


Understanding Property Taxes


Before diving into how property taxes affect your mortgage payments, it’s vital to understand the basics of property tax. Property taxes are a form of tax paid on real estate by landowners. Local governments use property tax to fund their services and operations, such as schools, hospitals, and services like garbage collection. The amount of property tax you pay can vary depending on your property’s assessed value and your area’s tax rate.


Including Property Taxes in Your Mortgage Payments


When you buy a home, you’ll have a mortgage. In most cases, you are required to make an additional monthly payment toward property taxes. The mortgage company holds the taxes in a separate account called an escrow account. When property taxes are due, your lender will use the money held in escrow to make payments on your behalf.


Tax Hikes and Your Monthly Payments


Property tax rates are not fixed and will change over time. Governments and local councils have the power to increase property tax rates, which can significantly impact your mortgage payment. It’s essential to be aware of any expected property tax increases and consider them when budgeting for your mortgage.


Yavapai County Tax

We are fortunate in Yavapai County to have a user-friendly online system 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, enter the property address on the Yavapai County Interactive Map.  Once you have the address displayed, select ‘Taxes’ from the right-hand column and view the taxes for the past five years. The Yavapai GIS System also shows assessed values and the amount of previous sales.


Purchasing a home is a significant investment, and it’s essential to understand all expenses you will incur, including property taxes. Property taxes can significantly impact your mortgage payment, and it’s essential to factor them into your home-buying plans. 

Dena and Dave Plane

(928) 830-6976