Understanding Property Taxes and Insurance:
A Homeowner’s Guide

Owning a home is a major milestone—and with it comes the responsibility of understanding the financial components that go beyond your mortgage payment. Two key elements every homeowner should be familiar with are property taxes and homeowners insurance. These costs can impact your monthly budget and long-term financial planning, so let’s break them down.

What Are Property Taxes?

Property taxes are annual taxes paid by homeowners to local governments, typically based on the assessed value of their property. These funds support essential community services like:

• Public schools
• Police and fire departments
• Road maintenance
• Parks and recreation

How They’re Calculated:
Your property tax bill is determined by multiplying your home’s assessed value by the local tax rate (also known as the mill rate). For example, if your home is assessed at $200,000 and your local tax rate is 1.5%, your annual property tax would be $3,000.

Why They Matter:
Property taxes can vary significantly by location and can increase over time as property values rise or local budgets change. It’s important to factor them into your monthly housing costs, especially if they’re included in your mortgage escrow account.

What Is Homeowners Insurance?

Homeowners insurance protects your home and personal belongings from unexpected events like fire, theft, or natural disasters. It also provides liability coverage if someone is injured on your property.

What It Covers:

• Dwelling coverage: Repairs or rebuilds your home if it’s damaged.
• Personal property: Covers belongings like furniture, electronics, and clothing.
• Liability protection: Helps with legal costs if someone is injured on your property.
• Additional living expenses: Covers temporary housing if your home becomes uninhabitable.

Cost Factors:
Premiums vary based on your home’s value, location, coverage limits, and even your credit score. Homes in areas prone to flooding or severe weather may require additional coverage, such as flood or windstorm insurance.

How These Costs Fit Into Your Mortgage

Most lenders require you to pay property taxes and insurance through an escrow .account. This means a portion of your monthly mortgage payment goes toward these expenses, and your lender pays them on your behalf when they’re due.

Benefits of Escrow:

• Simplifies budgeting
• Ensures timely payments
• Avoids large lump-sum bills

Tips for Homeowners

• Review your annual escrow statement to understand how your taxes and insurance are changing.
• Shop around for insurance to ensure you’re getting the best coverage at a competitive rate.
• Appeal your property assessment if you believe your home’s value is overestimated.
• Plan for increases—both property taxes and insurance premiums can rise over time.

Need Help Navigating Costs? At American National Bank, we’re here to help you understand every aspect of homeownership. Whether you’re buying your first home or refinancing, we can guide you through budgeting for property taxes, insurance, and more. Let’s make sure your home is not only a place of comfort—but a sound financial investment too.