How to Estimate Your Monthly Property Tax Payment

A monthly house payment is made up of several items, but most of it is principal and interest. The other major part of the payment is property tax. But, have you ever broken down how your tax is estimated?

To estimate your monthly real estate tax payment:

1. Multiply the total appraised value of your home by 40 percent.
   
   
2. Deduct from this amount your homestead exemption using the following county figures:
• $5,000 for Cherokee
• $8,000 for Forsyth
• $10,000 for Clayton, Cobb, DeKalb
• $12,000 for Henry
• $15,000 for Fulton
• For Fayette and Gwinnett call the tax commissioner for exemption information.
  
  
3. Divide the balance by 1,000.
   
   
4. Multiply this amount by the millage rate for your city:
• Alpharetta, 36.43
• Atlanta, 43.86
• College Park, 39.39
• East Point, 41.99
• Fairburn, 34.83
• Hapeville, 42.44
• Johns Creek, 34.44
• Milton, 34.44
• North Fulton, 34.44
• Roswell, 34.33
• Sandy Springs, 35.91
• South Fulton, 34.56
• Decatur, call 404-370-4100 for information
  
  
5. This final figure is your estimated annual tax
   
   
6. Divide by 12 to calculate your estimated monthly property tax

What Is "Escrow," and How Does It Work?

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If you've ever made an informal bet with a friend, you may have asked a third person to hold the money until the wager was resolved. When you take out a mortgage to buy a home, you're doing something similar by opening an escrow account.

How it works

When you put money in escrow it is held by a neutral third party (called an escrow agent) who works for both the lender and the borrower. The agent's role is to carry out the instructions agreed upon by both parties. The money is released when all the terms of the agreement are met. Escrow can be involved in anything from multimillion-dollar building projects to purchases made on online auction sites.

When it's used

When your mortgage closes, your lender will usually require you to open an escrow account to cover property taxes and homeowner's insurance. You'll make an initial deposit, followed by payments to the account every month. (Usually these are added to your regular mortgage payment.) The escrow agent will then release these funds as your taxes and insurance premiums come due.

Its purpose

The idea is to protect the lender by ensuring that you pay your taxes and insurance on time. If you default on your property tax, for example, your municipality can put a lien on the house, which would make it difficult to sell. Or if your house burns down and you've neglected to pay the insurance, the lender would be left with no collateral.

How you benefit

Escrow can benefit borrowers by helping them spread insurance and tax expenses evenly over 12 payments. For example, assume your yearly property taxes are two payments of $1,000 each, and your insurance is $400 annually. If you paid these directly, it would mean three large payments a year; your escrow costs, however, would be a manageable $200 a month.

Escrow payments

Your escrow account will have a built-in cushion -- if you miss a payment, the lender must still be able to pay your accounts on time. However, federal law prohibits lenders from requiring more than two months. expenses in escrow. And because your tax and insurance costs will change slightly from year to year, the lender will review and adjust your escrow payments annually.

When escrow may be waived

In most states, the money you place in an escrow account earns no interest for you. For that reason, many borrowers prefer to pay their taxes and insurance directly. Lenders may agree to this if your down payment is more than 20 percent, although some will raise your interest rate slightly to compensate. Once you agree to putting funds into an escrow account, however, it is difficult to cancel it, so make sure you fully understand the arrangement before your mortgage closes.

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