Purchasing a home requires you to estimate real estate taxes and insurance expenses.
Real estate taxes and homeowners insurance are a major portion of the expense of purchasing a home, and you must know what these costs will run before you commit to purchase and receive financing. In addition, these expenses may vary greatly between different municipalities. By estimating the costs in different areas, you can help control your housing expenses.
Property Tax Rate
Each municipality or taxing authority has its own tax rate that it applies to properties within its area. This rate, also know as a mill rate, is expressed as a certain amount of taxes assessed per $1,000 of real estate value. This rate is set by local ordinance. This rate will vary, as most authorities
reconsider this amount periodically. Local residents generally have a chance to have a say in setting the mill rate by participating in public hearings.
Tax Assessor's Valuation
With the mill rate set, the local tax assessors must have a property value to apply the mill rate towards. Assessors set the property tax value based on different criteria, depending on the locality. Some assessors use recent, comparable sales of homes within the community to establish a value. In rural areas, sufficient sales may not have occurred to establish a value in this way. In this case, the assessor may set a value based on the replacement cost of the home. Calculating the area of the home in square feet, and multiplying that area by an average amount to rebuild per square foot, establish the replacement cost.