When you’re buying a home, most people focus on the purchase price, loan amount, and interest rate. But there’s another key piece that can make a big difference in your monthly mortgage payment. And that’s property taxes.
Whether you’re buying in Philadelphia or the surrounding suburbs, property taxes play a major role in what you actually pay each month.
🏡 What Property Taxes Are & How They Affect Your Payment
Property taxes are based on your home’s assessed value and your local tax rate. Most homeowners pay them through an escrow account, where your lender collects a portion each month along with your mortgage payment, then pays the full bill when it’s due.
That means when your property taxes go up (or down), your monthly payment changes too, even if your mortgage rate stays the same.
📈 Why Property Taxes Fluctuate
Property taxes aren’t static. They can change year to year based on local decisions, real estate trends, and neighborhood growth. Here are some common reasons for fluctuations:
- Reassessments: Both the City of Philadelphia and surrounding counties (like Montgomery, Delaware, Bucks, and Chester) periodically reassess home values. If your property’s assessed value increases, your taxes likely will, too.
- Local Tax Rate Changes: Municipalities and school districts set their own tax rates, which can shift to meet budget needs or fund public projects.
- Neighborhood Development: As new businesses, schools, or parks move into an area, home values and assessments often rise.
- Expiring Tax Abatements (City of Philadelphia): Many newer homes in Philly come with a 10-year tax abatement, which significantly lowers property taxes. When the abatement expires, taxes can jump (sometimes by several thousand dollars a year) increasing your monthly mortgage payment.
💰 How Changes Impact Your Monthly Payment
Let’s say your property taxes increase by $1,200 per year. That’s an extra $100 per month added to your mortgage payment. Your lender will adjust your escrow contribution to make sure enough is collected to cover the higher bill.
Even if you have a fixed-rate mortgage, remember that your overall payment isn’t completely fixed. Property taxes (and insurance) can still fluctuate.
✅ What You Can Do
Here are a few proactive steps to stay ahead of tax changes:
- Review Your Escrow Statement Annually: Lenders typically send an escrow analysis each year showing whether your payment will change.
- Budget for Potential Increases: Even modest property tax changes can affect your monthly costs, especially when abatements end or reassessments occur.
- Stay Informed Locally: Each county (and Philadelphia itself) handles assessments differently. Keep tabs on local reassessment schedules or proposed rate changes.
- Ask Questions When Buying: If you’re purchasing a newer construction home in Philly, find out how many years remain on the tax abatement. In the suburbs, ask your agent for recent tax history and any upcoming reassessments that might impact your payment.
🏠 The Bottom Line
Property taxes are a crucial and sometimes unpredictable part of homeownership. They can make your “fixed” mortgage payment change from year to year, depending on where you live and how your property is assessed.
By understanding how property taxes work and staying informed, you’ll be better prepared to budget for the true cost of owning your home, whether it’s in the heart of Philadelphia or the beautiful suburbs surrounding it.
Have questions about property taxes, abatements, or homeownership in the Philadelphia area?
The Home Sweet Home PHL team is here to help you navigate it all from understanding local taxes to finding the perfect place to call home.
