Property Tax
Property tax is an annual tax charged by local governments — county, city, school district — on the assessed value of your home. It funds schools, roads, and local services, and it continues for as long as you own the home, long after the mortgage is paid off.
With most mortgages the annual bill is split into twelve parts and collected into an escrow account with each payment — the "T" in PITI. When the bill comes due, the loan servicer pays it from escrow.
Effective rates vary enormously by location — from under 0.3% of home value per year in the cheapest states to over 2% in the most expensive, and they differ again between towns in the same state. Assessed value isn't always market value either: many places assess a fraction of it or cap annual increases, and most offer exemptions (homestead, senior, veteran) that must be applied for.
Because the rate depends on where the home is, our state mortgage calculators pre-fill a sourced statewide average, and the tax line in the mortgage payment calculator is fully editable — replace it with the actual figure from the listing or the county assessor.
Related terms: Escrow, PITI, Homeowners Insurance.
