Skip to content

Costs

Property Taxes

Property taxes are what your local government charges based on your home's assessed value, and they fund schools, roads, and services. Lenders often collect them monthly in an escrow account and pay the bill for you when it's due. Rates and amounts vary a lot by state and county, so the same priced home can cost very different amounts.

Property taxes are a big reason your monthly payment is more than just principal and interest. Most lenders divide your annual tax bill into twelve and collect a piece each month through escrow, then pay the county when it’s due, so you’re never hit with a giant bill all at once.

What surprises buyers is how much taxes differ from place to place. Two homes at the same price can have very different tax bills depending on the state, county, and local rates. Because taxes can rise over time, your escrow portion can grow, which nudges your payment up even on a fixed-rate loan.

Related terms

Escrow

Escrow has two meanings in a home purchase. Before closing, it's a neutral account that holds your earnest money and documents. After closing, an escrow account is where your lender collects part of your payment each month to pay property taxes and insurance for you when they come due.

Homeowner's Insurance

Homeowner's insurance covers damage to your home and belongings from things like fire, storms, and theft, plus liability if someone is hurt on your property. Lenders require it because the home is their collateral too. The first year is often paid at closing, and future payments are usually collected monthly through escrow.

PITI (Principal, Interest, Taxes, Insurance)

PITI stands for the four parts of a typical mortgage payment: principal, interest, taxes, and insurance. Principal and interest pay back the loan, while taxes and insurance are often collected in an escrow account and paid for you. Lenders look at your full PITI, not just principal and interest, when they decide what you can afford.

Learn more

Last updated: June 13, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

← Back to mortgage terms

Have a question about your scenario?

I'll walk you through what it means for you, in plain English. No rate quote and no pressure.

Talk to Niko