You finally got your first job and have been looking at apartments in Fort York. Congratulations, but before you get carried away, we thought you should know more about property taxes. Property taxes are collected by the authority in whose jurisdiction the property is located. That could be the municipality, the federal government, or the state authority.
How is the money used? Taxes collected from a property is used to pay the police department, towards local schools, street repairs, police and fire departments, and everything else that makes your stay in the neighborhood comfortable.
Property taxes vary from State to State and even in some cases, from one neighborhood to another. The initial evaluation is made on the property, and so taxes payable will depend on the value of your home. The rate will be reviewed periodically even on an annual basis in some cases.
The property valuation may be based on the fair market value of your home and in some instances, the governing authority may multiply the assessment value by a percentage. Homeowners get incentives through exemptions that will significantly lower their obligation.
- Collection of Property Taxes
A homeowner has two primary methods of remitting their property taxes. The first is through an escrow account which the lender will manage. Amounts payable will accumulate and be payable through this account, and so the homeowner will not need to bother with the payments as long as the escrow account is in credit.
If escrow is not your preferred method, you can make direct payments to the authorities. Most lenders do not accept this method unless the borrower has over 20% equity in the property or makes a larger than usual down-payment. Property taxes are a high-risk item (following defaults) which is why most lenders discourage this direct-payment method.
- The Impact on you
Property taxes dictate the final amount of your property, seeing as they accrue every year and are inevitable. Before deciding on your preferred property and its location, you may want to do a little deeper research to avoid paying too much money in the end.
You also want to have in mind that these taxes are revised every year (in some cases), and so the value will probably keep going up.
- What Happens when you Default?
If you are unable to pay your property taxes for over five years, you risk losing your property. The taxing authority may sell your house (tax sale) to satisfy the bill, or they will sell the tax lien that will give the purchaser the right to foreclose on your property.
You can redeem a tax sale by paying the outstanding property taxes (plus interest and penalties) or by paying the lien buyer the amount they paid for it. The period within which you can execute this redemption is dictated by taxing authorities in which our property is located, but standard practice is within a year of the sale.
Now you know the basics of property taxes. Now you know who funds that library in your neighborhood.