Buying a house means taking on a tremendous amount of debt. The debt is paid for in monthly mortgage payments that cover the amount borrowed, lender interest and fees, and property taxes. The last item, property taxes, is the one that first-time buyers tend to know the least about. Yet it is just as important as the other two.

If you are a first-time buyer looking for the home of your dreams, don’t get hung up on any inferred differences between real estate taxes and property tax. They are one and the same. Also understand that you will be paying property taxes for as long as you own your home. Even as a renter you pay them. They are built into your rent.

In Salt Lake City, Utah, agents working at the CityHome Collective real estate brokerage are lucky enough to work in one of the hottest markets in the country. They say property taxes are something they spend a lot of time talking with clients about. Below are some key facts they say you need to know as a first-time buyer.

Include Them in Your Budget

One of the biggest mistakes first-time buyers make is not considering property taxes in the monthly budget. Property taxes are considered part of the total cost of home ownership. Every property owner pays them one way or another. As a first-time buyer, you may or may not pay your property taxes directly, depending on how you arrange financing. But know this: you will continue paying property taxes even after your mortgage is paid off.

The point being made here is that you have to count on property taxes as a regular annual expense. Whether you make your payments monthly, quarterly, or annually, you have to include them in your budget right along with other known expenses. Otherwise, they could derail your finances.

Taxes Paid Via Escrow

Assuming you are going to get a mortgage to purchase your home, you won’t have to worry about paying taxes directly until your mortgage is paid off. During the years your mortgage is active, your taxes will be paid via escrow. What is escrow? It is an account established by your lender for the purposes of paying your taxes.

Under an escrow arrangement, your lender will take a portion of your monthly payment and deposit it in the escrow account. Your taxes will be paid from that account when they are due. Lenders utilize this arrangement because they do not want homeowners falling behind on their taxes and losing their houses as a result.

Taxes Will Go Up

The one thing we know about taxes is that they always go up. Property taxes are no exception. Why bring this up? Because increased taxes could make your home unaffordable if you are already living on the edge of your budget when you buy. This is one of the reasons real estate brokers strongly recommend not pushing your budget to the limit.

As a first-time buyer, you would be wise to check the tax history of any property you are interested in. Hand-in-hand with that history is the property’s appraisal history. Both will give you an idea of how fast taxes in that area tend to rise. This way, you’ll have a better idea of what to expect in terms of future tax increases.

Buying that first house is an exciting and magical experience. But there is more to it than modern kitchens and enough bedrooms for the kids. There are things under the hood, like property taxes, you have to account for. It’s all part of the mix.

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