A Rising Home Value is Good Right?
Yes, but in a way it’s a double edged sword. Have you looked at your mortgage escrow statement recently? I did and my jaw dropped. My real estate taxes just jumped 31%.
It must have been a mistake I thought. Then I called my county auditors office and here is what I learned.
In Ohio, real estate values in all 88 counties are subject to a Sexennial Reappraisal and a Triennial Update. What’s the difference between a reappraisal and an update?
A reappraisal happens every six years and is a total re-evaluation of your home’s current market value. Your county may use multiple inputs to determine your home’s current value. Methods may include; sales analysis or comps, aerial photos, county maps, street level images, and possibly even field visits.
An update happens every 3rd year after your reappraisal and brings forward or updates your most recent reappraisal. The update process is not as comprehensive as a reappraisal, however it is meant to keep market values relatively up-to-date for taxing purposes. Visit State of Ohio reappraisal and update schedule here.
In Kentucky, real property in all 120 counties is appraised by an elected official called the Property Valuation Administrator or PVA. Kentucky property owners are generally required to list their property with the PVA every year between January and March 31st. Property values or assessments are done on a continual basis by the PVA. More on State of Kentucky property taxes may be found here.
Record Home Price Appreciation
One major factor that will drive your property taxes higher is housing market appreciation. According to the National Association of Realtors, prices of homes are climbing at the fastest pace in more than three decades. Many homes are selling above their listing price.
One reason has to do with new buyers like the Millennial generation seeking their first home. Demand for homes remains high and new home construction has generally not kept pace since the 2008/2009 Great Recession.
A second factor that impacts property taxes are new tax levies for schools, parks, and other public services. In my local tax jurisdiction, voters recently approved a police & fire levy and a school levy.
This combination of record high home values during a reappraisal year and two new tax levies drove my taxes up 31%. Ouch. Local Ohio counties Butler and Clermont had reappraisals in 2020 and Hamilton county homes will be reappraised in 2023.
What can homeowners do about higher property taxes? You can appeal the valuation of your home to your county auditor and you can vote against future tax levies. However, you should seriously evaluate a vote against levies because good schools, nice parks and adequate public services all help home values.
Is Refinancing An Option
Beyond impacting property taxes directly, you may be able to lower your mortgage payment as an offset to higher taxes. Refinancing your home now when rates are near historic lows may be an option.
First, compare your current mortgage rate to currently available mortgage rates. You’ll want to see at least 0.50% or more rate differential in order to make a noticeable difference in your payments. Second, look for a bank or mortgage lender with zero closing points and low closing fees.
For example, refinancing from a 3.50% to a 2.75% rate on a fifteen year $250,000 mortgage may reduce payments more than $1,000 annually. Using the same refinancing example over longer mortgage terms reduces payments even more. However, this may be a good time to reduce your term if you are still in a thirty year mortgage.
Talk to your mortgage lender and your adviser for details on your specific situation. If you don’t have an adviser or you think you want a fresh start we’d be happy to talk with you, just drop us a line here.