Closing, title & notaryAll terms starting with P
Property tax
An annual tax assessed by local government on real property, usually collected monthly through escrow.
Property tax is levied by local taxing entities based on an assessed value and the applicable rates. It is prorated between buyer and seller at closing and, for most mortgages, collected monthly into an escrow account.
Assessments and rates change, so a payment based on the seller’s tax figure can shift after the first assessment following a sale. Owner-occupied properties may qualify for exemptions that an investment property does not.
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Related terms
- Escrow account (impounds)An account your servicer uses to collect and pay your property taxes and homeowners insurance alongside the mortgage payment.
- PITIPrincipal, Interest, Taxes and Insurance, the four parts of a typical monthly mortgage payment.
- PrepaidsMoney collected at closing to fund your own future taxes and insurance, plus interest from closing to month end.
- Operating expensesThe recurring costs of running a property: taxes, insurance, management, maintenance, and owner-paid utilities.
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