Property Taxes: One More Expenditure Item for Homeowners
So, you have received a mortgage, bought your dream home in California, celebrated a housewarming party, and think your monthly payments are reasonable enough to let you live comfortably in the Golden State? Let me disappoint you: clouds are looming where you expected clear skies and bright sunshine. In addition to the regular payback sum you must fork out every month, you also have to pay property taxes on the real estate you have acquired, which ultimately affect its long-term affordability.
How come? Why did nobody warn me about that? Well, read on to discover all the details about what most homeowners don't know.
Property Taxes Explained
Strictly speaking, what we will call here "property taxes" are in fact real estate taxes, because the term "property taxes" is often associated with personal movable belongings, such as a vehicle or a boat. However, let's set those chattels aside and focus on the property taxes you pay on the house and land you own.
Property taxes of this kind are levied by local governments (towns, cities, and counties). They use the money collected through them to fund public services people in the area enjoy (schools, fire department, road maintenance, law enforcement, you name it). The amount of the taxes is based on the assessed value of your home and land. And – most importantly – they differ across states and even local jurisdictions within one state.
What about California?
California Property Taxes Dissected
First of all, you must realize there are no uniform property taxes across the entire Golden State. And it doesn’t depend on whether property prices in a county are low or high. Each local government sets its own tax rate. However, all of them must comply with Proposition 13. This amendment to the California Constitution, passed in 1978, establishes caps on local property taxes within the state and restricts increases in property assessments. How does the system work?
- The base tax rate across California is 1% of the assessed property value.
- Local taxes are added on top of this amount.
- Annual tax increases can’t exceed 2%.
- When ownership changes, or the property undergoes new construction, the value resets to the purchase price.
Although property taxes are calculated for a fiscal year, they are split into two installments. The first must be paid between November 1st and December 10th, and the second – between February 1st and April 10th of the next calendar year. If you fail to do so within these terms, penalties begin to accrue, so the fine may scale up to 50% of the debt amount (depending on how late you are).
Important Things to Remember about Property Taxes in California
There are some curious details that California homebuyers must know.
- The assessed property value isn't the same as its purchase price. The first is determined by local government assessors solely to calculate property taxes. It is relatively fixed and is updated annually. The second comes from the here-and-now agreement between the seller and the buyer of the real estate and is valid only at the moment the deal is completed.
- You may receive a supplemental tax bill (sometimes even two) months after you pay your property taxes. This happens because the county reassesses the property after it changes hands and adds the difference between the old and new assessed value to your taxes.
- You can learn the property tax amount on a home before you purchase it. This information is available through the local multiple listing service (MLS) or in real estate listings. Alternatively, you can ask the seller for the most recent tax bill.
As you can see, property taxes in California have many nuances to consider. To be on the safe side, it is wise to consult qualified experts in the tax and mortgage fields.
How LBC Mortgage Can Help You
Our lending firm has operated in the California mortgage market (and 10 other jurisdictions to boot) for over 18 years, so we know the legislation in the Golden State inside out. At LBC Mortgage, you can not only get competent legal advice on real estate here, but also access one of the two dozen loan types we offer to people living in Cali. With our financial assistance, you can become a homeowner or use the money we lend to acquire commercial property, rental accommodation, and even vacation or Airbnb lodgings.
Contact experienced specialists at our mortgage agency for a professional consultation on any aspect of getting a loan and making post-mortgage payments in California.
California Property Taxes in a Nutshell
When you buy a home in California, you should understand that real-estate-related expenditures won't be limited to monthly mortgage payments. Twice a year, you will have to pay property taxes equal to 1% of the assessed property value, plus an additional amount set by the local government of the town or county where your house is located. Moreover, it can increase annually by up to 2%, and a supplemental tax bill may arrive when authorities reassess the property after it changes hands.
To learn all the legal details pertaining to financial liabilities of a California property owner, get a consultation from vetted experts in the field.