When you refinance your house, the process is similar to what you went through when you first got your mortgage. Your financial situation will be confirmed and assessed, and your home will be evaluated to establish its worth to a possible lender. It’s usual for your monthly payment and even your total loan amount to fluctuate due to a refinance, but will your property taxes go up?
Will My Property Taxes Change After Refinancing?
When you buy a home, your mortgage company estimates your property taxes and adds that amount to your monthly payments. While property taxes are a private matter between you and the government, your lender pays them on your behalf. When you refinance, the lender is only attempting to determine how much money to place in an escrow account until the time comes to pay your property tax bill.
Your mortgage company should not need to adjust your property tax rate if you refinance your mortgage. If your home is worth $300,000 and your tax rate is 3%, your assessment will be $9,000. By taking money out each month, your mortgage company can assist you in paying this without dealing with a large tax bill once a year, but if your taxes increase, you may get a bill if enough wasn’t withheld.
What Factors Can Affect Property Taxes?
So, what affects your property tax bill? The most crucial component is the assessed value of your house, which differs from the fair market value or appraised value. For one thing, assessors use a different technique than appraisers, and while your house will be valued throughout the refinancing process, the results of the appraisal are shared with your mortgage lender, not the local tax authority.
Assume your home’s assessed value was $368,000 on your most recent property tax statement, but its appraised value is $430,000. The $368,000 amount would be used to compute your property taxes. The local tax authority will next analyze other assessments in the region and the local annual budget to calculate property tax rates, sometimes referred to as mill rates. Even if your house is assessed at a lesser value, your taxes may increase if the budget is raised.
Only as a form of forecast or projection can you link the refinancing procedure to your property tax amount. If you live in a hot real estate market with quickly rising house values, an appraisal number that is much higher than your assessed value might be seen as a signal that your assessment (and hence your property tax amount) may rise in the future.
However, this forecast is not always precise or quick. Increases in assessment values occur at a far slower rate than changes in housing market prices, and are normally only changed once each year. Furthermore, many towns have restrictions governing how much property taxes can be raised in a certain period.
While refinancing may not directly affect your property taxes, numerous factors could increase your bill. These include the budget being raised by the government and the assessed value of your home changing.
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