A comprehensive guide to property tax guide from NMHL mortgage experts.
NMHL Editorial Team2026-02-188 min read
<p>Every jurisdiction has an assessor’s office that determines the taxable value of your property. The assessment process typically follows these steps:</p>
<ol>
<li><strong>Market Value Determination:</strong> The assessor reviews recent sales of comparable homes, known as "comps," and may also consider the property’s size, age, and condition.</li>
<li><strong>Assessment Ratio Application:</strong> Many states apply a fixed percentage (e.g., 80% in Illinois) to the market value to arrive at the assessed value.</li>
<li><strong>Public Notice:</strong> Homeowners receive a notice of assessment, usually in the spring, with a deadline to request a review.</li>
</ol>
<p>If you believe your assessment is too high, you have the right to appeal. Successful appeals often hinge on presenting evidence such as recent sales of similar properties, a professional appraisal, or documentation of property damage.</p>
<p><strong>Appeal Timeline Example:</strong> In Florida, you must file a petition within 30 days of receiving the notice. The hearing is scheduled within 60 days, and a decision is rendered within 90 days of the hearing.</p>
<p>NMHL’s <em>TaxSmart Mortgage Program</em> includes a complimentary assessment review for borrowers who are refinancing a property with a disputed tax bill. Our specialists will help you gather the necessary documentation and file the appeal on your behalf.</p>
<p>Tax rates are not a single number; they are a collection of millage rates from multiple taxing entities. A mill is one‑thousandth of a dollar, so a rate of 12 mills equals 1.2%.</p>
<p>Typical components include:</p>
<ul>
<li><strong>County Tax:</strong> Funds county services such as roads and law enforcement.</li>
<li><strong>City or Municipal Tax:</strong> Supports local police, fire, and public works.</li>
<li><strong>School District Tax:</strong> Often the largest portion, financing K‑12 education.</li>
<li><strong>Special Districts:</strong> May cover libraries, parks, or water utilities.</li>
</ul>
<p>For example, a homeowner in Dallas County, Texas, might see the following breakdown:</p>
<table border="1" cellpadding="5" cellspacing="0">
<tr><th>Entity</th><th>Millage Rate</th></tr>
<tr><td>County</td><td>12.5 mills (1.25%)</td></tr>
<tr><td>City</td><td>6.0 mills (0.60%)</td></tr>
<tr><td>School District</td><td>22.0 mills (2.20%)</td></tr>
<tr><td>Special District</td><td>2.5 mills (0.25%)</td></tr>
</table>
<p>The combined rate of 43.0 mills translates to a 4.30% effective property tax on the assessed value. Understanding each component helps you identify where exemptions may apply—for instance, many school districts offer a homestead exemption that reduces the taxable value by up to $25,000.</p>
<p>Many states and localities provide targeted relief for qualifying homeowners. Below are the most common programs and the eligibility thresholds you should verify:</p>
<ul>
<li><strong>Homestead Exemption:</strong> Available in 44 states; typically reduces the taxable value by $25,000–$50,000 for primary residences. Some jurisdictions (e.g., Florida) also offer an additional $5,000 exemption for seniors.</li>
<li><strong>Veteran Exemption:</strong> In Texas, qualified veterans receive a $10,000 reduction in assessed value plus a 20% discount on the tax rate.</li>
<li><strong>Senior Citizen Exemption:</strong> Many counties cap taxes for homeowners over 65 with incomes below $30,000.</li>
<li><strong>Disability Exemption:</strong> In California, disabled homeowners can receive a $7,000 reduction in assessed value.</li>
<li><strong>Energy‑Efficiency Credits:</strong> Some municipalities offer a credit of up to $500 for solar panel installations that meet local standards.</li>
</ul>
<p>To claim an exemption, you usually submit an application to the county assessor’s office along with proof of eligibility (e.g., DD‑214 for veterans, income statements for seniors). NMHL’s <em>Homeowner Advantage Program</em> includes a free eligibility check for all borrowers, ensuring you don’t miss out on available savings.</p>
<p>When you close a loan with NMHL, you’ll decide whether to use an escrow account. Here’s how each option works:</p>
<h4>Escrow Account</h4>
<ul>
<li>Lender collects an estimated portion of your annual tax bill each month.</li>
<li>Funds are held in a neutral account and disbursed to the tax authority when due.</li>
<li>Provides budgeting simplicity—no large lump‑sum payments.</li>
<li>Required for most conventional loans with a down payment under 20%.</li>
</ul>
<h4>Direct Payment</h4>
<ul>
<li>You receive the tax bill directly and pay it yourself, typically quarterly or annually.</li>
<li>May lower your monthly payment, but requires disciplined savings.</li>
<li>Often allowed for jumbo loans or borrowers with >20% equity.</li>
</ul>
<p>NMHL recommends an escrow account for first‑time buyers and borrowers with limited cash reserves. Our <em>Escrow Management Dashboard</em> lets you track balances in real time, view upcoming disbursements, and receive alerts if your escrow falls below the required cushion (usually 2 months of taxes).</p>
<p>Property taxes are not static. Two major forces can raise your bill over time:</p>
<ol>
<li><strong>Re‑assessment of Value:</strong> Many jurisdictions reassess properties every 3–5 years. If home values rise 5% annually, your tax bill could increase by a similar percentage.</li>
<li><strong>Tax Rate Adjustments:</strong> Local governments may raise millage rates to fund new schools or infrastructure projects.</li>
</ol>
<p>Proactive strategies include:</p>
<ul>
<li><strong>Annual Budget Review:</strong> Use NMHL’s <em>Tax Forecast Calculator</em> to project next‑year taxes based on a 3% appreciation assumption.</li>
<li><strong>Reserve Savings:</strong> Set aside 1% of your home’s market value each year in a high‑yield savings account.</li>
<li><strong>Refinance Timing:</strong> If you anticipate a large tax increase, consider refinancing before the reassessment to lock in a lower rate and possibly a lower escrow requirement.</li>
</ul>
<p>Our <em>Future‑Proof Mortgage</em> program offers a rate‑lock extension of up to 180 days, giving you flexibility to wait for a favorable tax environment before closing.</p>
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Frequently Asked Questions
A property tax is a levy imposed by local governments based on the assessed value of your real estate. It funds schools, roads, and public services, and lenders typically require you to escrow a portion of each mortgage payment to ensure the tax bill is paid on time, protecting both you and the lender from tax liens.
Visit your county assessor’s website or call the assessor’s office; most provide an online portal where you can enter your address to view the latest assessment and a breakdown of millage rates for each taxing district.
Yes. Most jurisdictions allow an appeal within 30‑45 days of the assessment notice. Gather recent comparable sales, a professional appraisal, or evidence of property damage, then submit a formal petition with supporting documents to the assessor’s board.
Common exemptions include the homestead exemption (often $25,000‑$50,000), veteran exemption (e.g., $10,000 reduction in Texas), senior citizen caps, and disability reductions. Eligibility varies by state, so check with your local assessor and let NMHL’s Homeowner Advantage Program verify your eligibility.
Escrow is required for most conventional loans with less than 20% down and is the safest way to ensure taxes are paid on time. Borrowers with >20% equity or jumbo loans may opt to pay taxes directly, but they must maintain a disciplined savings plan to avoid missed payments.
NMHL offers the TaxSmart Mortgage Program, which includes a free assessment review, assistance with exemption applications, and an escrow analysis to ensure your new loan accurately reflects current and projected tax obligations.
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