How to Calculate Your Taxes
When a lending institution works on qualifying someone for a home loan, it considers the amount of assets the borrower or borrowers have as a reserve to cover the mortgage payments if they should suffer a loss of monthly income. The amount of money the borrower needs to cover is summarized by PITI, or the mortgage payment, interest, property taxes and insurance. The lender sets a requirement, such as coverage for at least two month's of PITI, to qualify a borrower for a given loan. The following steps can help you calculate the property tax portion of PITI.
First: Locating the property tax rate
Locate the property tax rate for your county. You can find the rate by calling your tax assessor's office or the county's local government office. If you have not yet purchased a property and are trying to assemble an estimate, use a benchmark rate. For example, in the state of California, a tax rate estimate of 1.25 percent considers a home's first-year property tax bill and includes a component to accommodate any additional tax for Mello-Roos or other community bond payments and fees or payments for things like pest abatement or a sewer district bond.
Second: Your home's assessed value
Find the assessed value of your home. As a new home owner, an appraisal should is completed as part of the purchase. If you already own the home, check with your county tax office, or look at last year's property tax bill to see if your county tax assessor increases the assessed value of your home by a specific percentage each year. For example, California's Proposition 13 allows the tax assessor to increase assessed home values by a maximum of 2 percent value appreciation per year. If you have not yet bought the home, look up the home's previous year's property taxes paid at the tax assessor's office, and factor in estimated increases or decreases to assessed value and any changes in the current year's property tax rate.
Third: Calculating property taxes
Multiply the home's assessed value by the property tax rate. If your county increases assessed home values each year, calculate your home's new assessed value first. Then, multiply this value by the property tax rate to arrive at the total property tax due for the year. Divide this result by 12 to find your monthly property tax payment.