3%?? Isn't it more like 6%???? (Williamson County Taxes) (Austin, Round Rock: sales, renting)

[jwb123]

Hey, we have just moved to Round Rock (well, we've been here since Oct) from the Seattle area.

We were totally stoked about the housing prices here - and were just giddy with excitement at the thought of what we could get here, for what we paid there.

We are renting right now - and were getting ready to build ... when we started talking to some mortgage people... and boom, our bubble was seriously busted.

I was quoted property taxes that were about 5-6%. An extra $500+ onto our monthly payment. If our sales price was $250k, then you can figure on a payment that is about 1% of that, or $2500 a month.

.. and then everyone quickly follows up with the "Well, but there is no state income tax, so it all washes out..."

Ummmmm.... NO, it doesn't. There is no state income tax in WA.

In the Seattle area, we paid something like 3% property tax, we had a very old (22 yrs old, so old enough to need some cosmetic help drastically, but not so old that it could be labled old world or quaint and charming) fixer upper, 1600 sq ft, with a large lot, in an aging neighborhood.... and aging suburb. Terribly in need of revitalizing. Same loan amount, and our payment was $1000 less!!! Appraised and sold for $365k!!

WHAT IS THE DEAL???

[austin-steve]

I was quoted property taxes that were about 5-6%. An extra $500+ onto our monthly payment. If our sales price was $250k, then you can figure on a payment that is about 1% of that, or $2500 a month.

You've been misinformed, I can assure you. I think you may also be incorrectly calculating your tax payment as a percentage of your monthly mortgage payment (PITI). It's calculated as a percentage of assessed market value.

Property taxes in Round Rock are as high as 3.25% of the appraised value in some areas, but nowhere in Texas are they 5-6%. Austin is about 2.75% of the appraised value annually. All Texas property taxes are about to drop a slight bit due to decreases in the school tax portion passed by the legislature.

Go to http://www.wcad.org/ and look up your address, or the address of a completed home in your neighborhood, to find the exact tax rate in that area. Ask your mortgage person to better explain the numbers and, if they can't, consider finding another mortgage person. It's not rocket science.

On a $200K house at 3% for example, your taxes will be about $6,000/yr, or about $500/mo. (reduced somewhat by your homestead exemptions). If its' a newer neighborhood, you'll also have HOA fees of probably $12 to $35/mo. in most cases.

I tell people to stay out of the new home neighborhoods in Round Rock/Hutto/Manor/Elgin. It will take you a while to build any equity with all the new construction that will continue for many years to come - especially if you put down a small or zero downpayment. If that's the case, make sure you won't need to sell in the next 3 to 5 years or you may find yourself upside down after sales costs.

Good Luck!!

Steve

[AustinTraveler]

Yup, Steve's advice is great.

Here's the math broken down:

If you are paying $500 per month on a $250K mortgage, then you are paying less than 3% in taxes.

$250,000 x 3% = $7,500

$7,500 / 12 months = $625

[jwb123]

You are right, I think I am misinformed, in some regard. I am wrong about the percentages - but $6000 was what I was thinking.

Anyway, more to the point, STILL $6000 a year is double what we paid in Seattle. Like I said, on the same loan amount, same basic terms of the loan - we went from a payment of $1580 per month, to well over $2000.

Here are the specific quotes I was given from a recommended mortgage person...

Ok, here are the monthly totals for the prices you are considering. (this include taxes and insurance in Forest Creek)
30 year fixed, 100% financing, 80/20 loan
260K - $2425
250K - $2335
240K - $2242

If you go with an Interest Only loan here are the numbers:
260K - $2257
250K - $2171
240K - $2085


I don't get the price difference? It appears as it IS rocket science, because it just doesn't make any sense to my husband, or myself.

[jwb123]

Oh, and on the new construction/equity aspect - I totally agree - but we do hope this is the home we will be in while the kids make it through their schooling years (they are pretty young now, oldest being in 1st grade) so we intend on settling in for a good while.

[AustinTraveler]

Here's the problem with comparing your Seattle taxes with Texas taxes. You are comparing mortgage prices, not tax assessed amounts. Seattle may have had your home assessed lower than the mortgage amount.

[austin-steve]

but we do hope this is the home we will be in while the kids make it through their schooling years (they are pretty young now, oldest being in 1st grade) so we intend on settling in for a good while.

Forest Creek is an Exemplary rated elementary school. I think in your case, with small kids, it's a great place to be. I've only heard great things about the school.

Welcome to Austin!!

Steve

[jwb123]

We love Forest Creek - and are absolutely thrilled with the school. We love Austin too, and we are so happy to be here... and this is the only sticking point

"Seattle may have had your home assessed lower than the mortgage amount."

Could be.

I admit that I know just enough about all this to buy a home (we have bought 2 in the Seattle suburb area in the last 7 yrs), and be dangerous, I suppose... we paid our taxes included with our monthly mortgage payment, so I never officially had to deal with the county assessment people. And with a busy life of 3 young kids, one with a disability, to my detriment perhaps, I admit I probably didn't investigate all the in's and out's about this I am just familiar with the bottom line - a much higher payment!!

I do know that when we sold it, it appraised way over loan amount. $249k loan, to over $365K value.

I do remember getting the assessments and values in the mail - and perhaps they only taxed on land value?? And didn't include the housing value?? I don't know... but I would think that considering property value is any state's biggest source of revenue, they would tax as much as they can, in their favor? Especially given there is no state income tax.

[jwb123]

What are some of the exemptions that we can take?

We are not seniors! That's the only one I have heard of.

[southaustingal]

You can take a homestead exemption, which cuts off a bit, not much. You can also take an agricultural exemption if you have property being used for agricultural purposes, like farming, ranching. I'm not super familiar with either. We have a homestead. It will likely save us $1,000 on an $8,000 tax bill (home value of $260K).

Yeah, property taxes suck, especially when your income is relatively fixed, which ours is. Just jump in the rat race and keep getting promotions and raises, and you'll be fine.