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Trends in My Property Taxes
Jun. 1st, 2011 10:53 pmI've ditched my escrow account and now have to do my own calculations for how much to save each month for the annual payment.
Method 1 - copy my lender.
a) Estimate next year's taxes using the following complex calculation: this year = last year
b) Add 1/6 of that amount as a cushion. ("Section 10 of the Real Estate Settlement Procedures Act (RESPA) authorizes lenders to collect and maintain up to one-sixth of your total disbursements in your escrow account at all times. The required reserve is used to cover increased tax and insurance disbursements.")
3373.04 * 1 1/6 = $3935.21
Therefore, save $327.93/month.
**
Method 2 - make my own estimate based on my entire tax paying history rather than just last year's amount.
The mean change from one year to the next was 9.4%
The median change was 10.6%
The range was from -5.3% to + 16.1%.
Pulling out the highest and lowest values, the remaining range was +2.2 to +14.3%
If I round to the nearest whole number, the mode was 12%.
It looks like 12% is a fairly conservative figure. $3373.04 * 1.12 = $3777.80
Therefore save $314.81/month.
**
Method 3 - look at my county's estimate for this year. (I don't get this statement until April, but April has already passed for this year.)
$3373.04.
This number is the proposed assessed value (which I think changes only if I protest it) times last year's tax rates. Since this year's assessed value is the same as last year's assessed value, their estimate for this year is the same as last year's actual amount. Tax rates can actually go up or down depending partly on whether the people deciding these feel bad about how much housing values go up. Over the last five years, these estimates have tended to be about 1% too low.
$3373.04*1.01 = $3406.77
Therefore save $283.90/month.
**
I like that all those numbers are in the same ballpark. For this year, I'm going to continue with my lender's philosophy because it's the highest number AND I've already been budgeting for that amount. Any excess I will end up having saved will to go toward future miscalculations in the other direction.
In future years, I think I will check the property values and save the higher of the % change in values or the 1/6 lender mandate.
**
I have to do the same thing for my homeowner's insurance, but that amounts to only about one-seventh as much as property taxes do, so it doesn't matter so much if I screw up.
Method 1 - copy my lender.
a) Estimate next year's taxes using the following complex calculation: this year = last year
b) Add 1/6 of that amount as a cushion. ("Section 10 of the Real Estate Settlement Procedures Act (RESPA) authorizes lenders to collect and maintain up to one-sixth of your total disbursements in your escrow account at all times. The required reserve is used to cover increased tax and insurance disbursements.")
3373.04 * 1 1/6 = $3935.21
Therefore, save $327.93/month.
**
Method 2 - make my own estimate based on my entire tax paying history rather than just last year's amount.
The mean change from one year to the next was 9.4%
The median change was 10.6%
The range was from -5.3% to + 16.1%.
Pulling out the highest and lowest values, the remaining range was +2.2 to +14.3%
If I round to the nearest whole number, the mode was 12%.
It looks like 12% is a fairly conservative figure. $3373.04 * 1.12 = $3777.80
Therefore save $314.81/month.
**
Method 3 - look at my county's estimate for this year. (I don't get this statement until April, but April has already passed for this year.)
$3373.04.
This number is the proposed assessed value (which I think changes only if I protest it) times last year's tax rates. Since this year's assessed value is the same as last year's assessed value, their estimate for this year is the same as last year's actual amount. Tax rates can actually go up or down depending partly on whether the people deciding these feel bad about how much housing values go up. Over the last five years, these estimates have tended to be about 1% too low.
$3373.04*1.01 = $3406.77
Therefore save $283.90/month.
**
I like that all those numbers are in the same ballpark. For this year, I'm going to continue with my lender's philosophy because it's the highest number AND I've already been budgeting for that amount. Any excess I will end up having saved will to go toward future miscalculations in the other direction.
In future years, I think I will check the property values and save the higher of the % change in values or the 1/6 lender mandate.
**
I have to do the same thing for my homeowner's insurance, but that amounts to only about one-seventh as much as property taxes do, so it doesn't matter so much if I screw up.