Will My Property Taxes Go Up If I Refinance?

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Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

Will My Property Taxes Go Up If I Refinance?

  

Because the current interest rate environment is so conducive to refinancing, a concern that some have about taking action stems from confusion related to how their property taxes are determined, and specifically the question, "Will refinancing cause my property taxes to go up?"  It goes without saying that nobody wants to save money via refinance, only to see it evaporate in the form of higher real estate taxes.  But is this a real threat?  Or is it safe to assume that simply by refinancing you would not see a change in your tax basis?

 

Our answer must first address, well, the address --- of the home, that is.  Since I'm a licensed loan officer in the state of California, working out of an office in Marin County, I'm only going to view this topic through my designer sunglasses.  In California, properties are assessed to market value when they change ownership, and change of ownership does not typically happen in a refinance.  So if you purchased a home for $500,000 in 2015, and it appraises for $650,000 in 2020 when you obtain your refinance appraisal, the county assessor is still working off your original assessed value as far as your tax basis is concerned.  Behind the scenes is a more complex calculation that has to do with changes to the ad valorem portion of your tax bill, adjusted by the lesser of a 2% annual increase OR the rate of inflation, as dictated by Proposition 13.  If you have questions about how to interpret your tax bill, give me a call or send me an e-mail any time and we'll review it together.  But again, the incremental adjustments to the original basis prevail here and not a jump to the appraised (or market) value at the time of refi.

 

"But wait!" you say.  "My tax bill really did go up when I last refinanced!"

 

OK --- let's look at this a little closer.  We know that a refinance alone would not usually trigger a reassessment, but are there some things that could cause a fluctuation in the amount of tax you’ve been paying?  At times in the past, and especially during the downturn in 2008 through 2012, some homes were eligible for a temporary reduction in tax rate.  Those will revert back to their regular basis with rising values, though this may seem disconnected and cause one to think the property tax rate has been reassessed.  But the most common culprit is an escrow account for taxes and insurance.  Adjustments by your loan's servicer that are required to maintain a sufficient balance might show up as increases to your PITI payment.  Both of the above examples could have coincided with your refinance and they may have changed your tax payment amount, but they would not have been a result of the refinance itself.

 

I realize that property taxes are a significant component of your total monthly housing payment.  After all, I pay them too!  So if you're thinking about refinancing to get into better terms or a lower payment, and you have been reluctant to do so because you feel a mortgage lender's appraisal and process could trigger an increase in your property tax bill, you can step back from the ledge and take a deep breath.  Refinancing, in and of itself and the vast majority of the time, does not cause your property taxes to increase in California.

 

Eureka!  I have found it,

 

Rob Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 
rob.spinosa@rate.com

 

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.

 

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 - (866) 934-7283

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Rainmaker
1,886,498
Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Nice post, Rob. I found your map of the property tax burden by state of interest, too. I hope others from states other than California weigh in here and let us know what happens with a re-fi in their states.

May 19, 2020 08:42 AM #1
Rainmaker
443,524
Catherine Ulrey
Keller Williams Capital City - Salem, OR
Equestrian and Acreage Property Specialist

Poor Hawaii, the most taxed (property) State!

May 19, 2020 10:41 AM #2
Rainmaker
908,650
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

We are seeing a re-assesement of properties in a nearby county, following a court order and we may very well see adjacent counties follow, the sale of a property does not trigger a re-assesment in PA, unless it is new construction or significant remodelling was done prior to the sale.

May 19, 2020 02:24 PM #3
Ambassador
3,976,048
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Rob interesting how property taxes work differently in different states.  In CT.  Each town/city goes through re-evaluation every 5 years to establish the appraised and assessed value for the next 5 years.  It does not matter how many times the house sells or is refinanced in those 5 years, the value stays the same for property tax purposes.  The taxes only go up or down during the 5 years if there are changes to the Grand List, which than in turn changes the Mill Rate.

May 19, 2020 03:07 PM #4
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi -an interesting question that I'd not thought of.  And once again it proves how local real estate it. 

May 22, 2020 06:19 PM #5
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Rainmaker
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Rob Spinosa

SVP of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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