How to Calculate Property Tax & Insurance
Property tax payments are obligations associated with owning real estate property. Assessments are levied by the government of the county in which the house is located. Tax amounts are based on the property’s value and services provided by the county.
Property insurance is required by lenders on all financed property to cover unanticipated damages. The payment amount is based on the property value and mortgage balance, along with additional coverage needs such as having a swimming pool.
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Instructions
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Property Taxes
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1
Locate your property tax statement, which is issued yearly. In California, as an example, the payments are divided into two separate installments. Your first installment is due by Nov. 1 and becomes delinquent on Dec. 10. The second installment is due by Feb. 1, and becomes delinquent on April 1.
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2
Review your current tax statement and compare it to the previous year's statement. Check for any changes or added charges from the previous year statement. Contact your county assessor’s office if you need additional information or clarification about a charge.
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3
Calculate your "estimated" annual tax amount by multiplying the assessed property value by 1.25 percent. The 1.25 percent factor is widely used in the mortgage financing industry and will provide for a close estimate.
Property Insurance
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4
Gather your property insurance statement, which is provided to you following the annual renewal. In some cases, you may receive a monthly statement or payment coupon for added convenience.
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5
Determine if your statement is for the yearly premium or the monthly payment amount. Depending on your coverage needs, the premium can differ each year.
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Calculate the estimated yearly amount by multiplying the property value by 0.35 percent. Divide this result by 12 to determine a monthly amount due. The 0.35 percent factor is widely used in the mortgage, banking and insurance industry and will provide for an accurate estimate.
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Tips & Warnings
Assessed value is the last transferred value, usually the purchase amount.
The average tax for California, for example, is 1.08 percent of the assessed value.
Both first and second tax installments can be paid together, by Dec. 10.
A 10 percent property tax penalty of the payment amount is applied after the payment delinquent date.
Real estate is reassessed following change of ownership, or when major improvements are made.
References
- Photo Credit A businessman calculating expenses at tax time image by Christopher Meder from Fotolia.com
