# How to Estimate Taxes on a Mortgage

When you obtain a mortgage on a home, the lender often requires you to pay part of your annual property taxes along with each monthly mortgage payment. Your lender deposits the monthly tax payment into a separate account, called an escrow account, and pays your tax bill when it’s due. This protects your lender from owing unpaid taxes if it has to foreclose on your home. When you know where to look and the right questions to ask, you can estimate your property taxes you are liable for on a monthly basis.

Step 1

Contact your county’s assessor’s office, and find out the assessment rate and your property’s appraised value. Multiply the assessment rate by the appraised value to calculate the property’s assessed value, or taxable value. For example, assume your home’s appraised value is \$750,000 and the assessment rate is 25 percent. Multiply 25 percent, or 0.25, by \$750,000 to get an assessed value of \$187,500.

Step 2

Find out the combined tax rate from the assessor’s office. This rate comprises the individual tax rates of the various jurisdictions that receive a portion of your property taxes, such as cities, towns, counties, the state, schools, parishes, utility districts and special districts. The combined tax rate might be expressed as a percentage, a millage rate or a tax amount per \$1,000 of assessed value, such as \$42 per \$1,000. A millage rate describes how many “mills” per dollar of assessed value you owe in tax. One mill equals one-tenth of 1 percent. If the tax rate is expressed as a millage rate or as an amount per \$1,000, divide it by 10 to convert it to a percentage. In this example, assume the combined tax rate is 42 mills. Divide 42 by 10 to get a combined tax rate of 4.2 percent.

Step 3

Multiply the assessed value by the combined tax rate to calculate the annual property tax. In this example, multiply 4.2 percent, or 0.042, by \$187,500 to get \$7,875 in annual property tax.

Step 4

Divide the annual property tax by 12 to estimate the amount you owe with each mortgage payment. In this example, divide \$7,875 by 12 to get \$656.25 in monthly property tax.

Step 5

Add the monthly tax to the principal and interest portion of your mortgage payment and any other monthly amounts your lender collects -- such as homeowners insurance -- to calculate your total monthly mortgage payment. Concluding the example, assume your principal-and-interest mortgage payment is \$3,500 and you pay \$100 per month in homeowners insurance. Add \$3,500, \$100 and \$656.25 to get a total monthly payment of \$4,256.25.

#### Tip

• Many municipalities allow you to search for your property’s appraised and assessed values online for free using your address or other information. Some also provide free tools and calculators to estimate your property taxes.
• Some municipalities offer exemptions to certain homeowners, such as those over a certain age or those whose home is their primary residence. An exemption reduces your property’s taxable value, which reduces your annual property tax. Ask your assessor’s office if you qualify for any exemptions.

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