What's the Best Way to Pay Property Taxes?

First Republic Bank
May 13, 2021

Property taxes are a critical part of retaining the value of homes and communities for homeowners. With interest rates at near-historic lows and millennial homebuyers flooding the market, it is crucial for new homebuyers and homeowners to understand how property taxes can factor into their long-term financial picture.

Property taxes are a perpetual expense and must be paid even after an entire mortgage is paid off. When looking for the best ways to pay your property taxes, homeowners should evaluate whether each financial solution aligns with their financial goals to avoid inadvertently shifting expenses and ultimately accumulating more debt. Before diving into the different financing options, it is useful to understand the basics of property taxes and the many factors that may affect them.

What is property tax?

In short, property taxes are taxes collected from real estate owners by the government at the state, county and local levels, depending on the location of the property.

Property taxes account for most of the revenue needed to fund vital government programs like public schools and libraries, emergency services, collective sanitation services such as garbage removal, sewer service and more.

Property tax rates and the types of properties taxed vary by jurisdiction. When purchasing a property, it is essential to consider the applicable tax laws.

The property tax formula explained

Assessing your property value using the property tax formula can help you understand how much you should expect to pay in property taxes. To understand the property tax formula fully, you should consider its parts in context.

Property tax levied on property = (mill rate x taxable property value) ÷ 1,000

The mill rate is the amount of tax payable per dollar of the assessed value of a property. Different mill rates are charged by different agencies, including the township/city, the county, school boards, and/or emergency services districts. Multiple mill rates are then combined to get a final rate, which is used to calculate your property tax bill.

The taxable or assessed property value is assigned by a government assessor. Each tax region has different procedures for calculating assessed or taxable property value. However, the basic standards are primarily the same. Assessed value determines the value of a residence for tax purposes and takes comparable home sales and inspections into consideration.

How long do I have to pay my property taxes?

Property taxes are paid to the local government and are usually collected annually or bi-annually. There are two options to pay your property taxes.

The first option is to pay your property taxes as a part of your monthly mortgage payment, through an escrow account set up by your lender. The lender then pays the property tax on your behalf at the end of the year (or whenever due). In this case, the property tax is added to your monthly mortgage payment. However, you should note these are two separate expenses.

The other option is to pay the property taxes directly to your local tax collector.

Methods for paying my property taxes

There are several ways to pay your property taxes. Depending on your local county’s treasurer office, you may be able to make online payments using a credit/debit card, send a check or money order via mail, or either. Additionally, homeowners may also be able to pay online with an electronic check or via telephone using a credit/debit card.

We recommend looking into all the payment options available in your county to see what works best for you.

What are my property tax financing options?

While there are a many property tax financing options available, it is best to consider which solutions offer access to the funds you need to cover your property tax bill without disrupting your long-term financial plan.

  • personal loan offers fixed monthly payments and competitive interest rates for qualified borrowers, but a longer payment term can lead to an expensive     property tax loan. This option might include a prepayment penalty as well.
  • Using savings is a good way to pay your property taxes, as it  does not require taking out a loan or line of credit with added interest or fees.
  • Paying with credit cards may not be suitable for paying property taxes as they have a high average APR and may come with additional fees.
  • A personal line of credit with low interest rates and convenient access to funds can be a flexible financing option for your property taxes.

Pay your property taxes with a Personal Line of Credit

With smart financing, paying your property tax becomes convenient in many ways. Keep in mind, it is important to research the financing options available to you and go with the one that makes the most sense for you.

First Republic's Personal Line of Credit rises up as a strong contender as it offers low fixed rates of 2.25%-3.50% APR, with discounts¹. It also offers the benefit of interest-only payments, wherein you only pay interest on what you draw for in the first two years, and repay the full loan with term options that best suit your financial goals.

In addition, a First Republic Personal Line of Credit can be used to finance your current and upcoming income taxes, keeping your cash savings untouched.

You also get the flexibility to finance your minor home improvements such as window maintenance, minor kitchen or bathroom upgrades, solar panels, swimming pools and more.

If you think a Personal Line of Credit from First Republic is the right financial solution for your needs, calculate your rate and connect with a banker today.

First Republic’s Personal Line of Credit – access funds with fixed rates from 2.25% APR (with discounts).

1. Annual Percentage Rate. Rates effective as of 06/15/2020 and are subject to change.

Borrower must open a First Republic ATM Rebate Checking account (“Account”). Terms and conditions apply to the Account. If the Account is closed, the rate will increase by 5.00%. Rates shown include relationship-based pricing adjustments of: 1) 2.00% for maintaining automatic payments and direct deposit with the Account, 2) 0.50% for depositing and maintaining a deposit balance of at least 10% of the approved loan amount into the Account, and 3) an additional 0.25% for depositing and maintaining a deposit balance of at least 20% of the approved loan amount into the Account.

Personal Line of Credit consists of a two-year, interest-only, revolving draw period followed by a fully amortizing repayment period of the remainder of the term. Draws are not permitted during the repayment period. Full terms of 7, 10 and 15 years available.

This product can only be used for personal, family or household purposes. It cannot be used for the following (among other prohibitions): to refinance or pay any First Republic loans or lines of credit, to purchase securities or investment products (including margin stock), for speculative purposes, for business or commercial uses, or for the direct payment of post-secondary educational expenses. This product cannot be used to pay off credit card debt at origination.

Personal Line of Credit minimum is $60,000; maximum is the lesser of $350,000 or debt to be repaid at origination plus $100,000. If no debt to be repaid at origination, the maximum loan amount is $100,000. Line of credit cannot be fully drawn at origination.

The terms of this product may differ from terms of your current loan(s) that are being paid off, including but not limited to student loans. By repaying such loans, you may permanently be giving up tax and repayment benefits, including forbearance, deferment and forgiveness, and you may not be able to re-obtain such benefits if this loan is refinanced with another lender in the future.

Contact your legal, tax and financial advisors for advice on deciding whether this is the right product for you. Terms and conditions apply.

Product is not available in all markets. For a complete list of locations, visit firstrepublic.com/locations. Applicants must meet a First Republic banker to open account. This is not a commitment to lend; all lending is subject to First Republic’s underwriting standards. Applicants should discuss line of credit terms, conditions and account details with their banker.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document.

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