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Controlling the Costs of Home Ownership

Texas is one of the most affordable states to purchase a home, but there are other costs associated with home ownership that can get out of control if you do not monitor it every year (and I am not referring to home maintenance).

Besides our mortgage, the other two large costs are property taxes and property insurance. Since we do not pay state income tax in Texas, the state gets a big part of their revenue from property taxes, which ranges from a low of 2.5% to 4% of the value in some neighborhoods. While we cannot control the percentage, we can control the value to some degree.

Recently I have heard a big misconception that the tax appraisal represents the value of what a house should be sold for, and that is entirely wrong. Homeowners that are diligent in keeping their tax values low, will see a huge difference in the tax appraisal, verses what an appraiser hired to determine value for a bank loan will come up with. The goal is to always keep our tax appraisal lower than what you can sell your home for!

Most tax appraisals or home valuations are mailed in April, and homeowners have until May 31 to file a protest either online or by regular mail. Please be warned that this is like the IRS, if the form is not postmarked by May 31, it will be denied automatically. For more information on procedures, please see http://www.window.state.tx.us/taxinfo/taxforms/50-195.pdf.

The tax authorities can legally increase your property values 10% annually, so if you are not diligent in monitoring this, before you know it, your tax values are higher than what you could sell your home for! Homes increase in value on average of 4%-6% in West Houston, so you can see where this could get out of control.

You have many options for protesting your taxes, ranging from doing it yourself in person or online, to hiring a property tax consultant that will only charge you if they are successful in reducing your values. The fee is generally 50% of the money saved.

Property insurance is another big expense that you should monitor regularly. Insurance companies are in the business to make money, and when they experience high claims in a specific zip code, they distribute that loss back to the homeowner through increased premiums.

Most homeowners pay their insurance through an escrow account held by the mortgage company, so this is easily overlooked. The mortgage company always sends a notice of an increased escrow fee if the taxes or insurance increase, but most homeowners don’t pay close attention to this. What seems like a small monthly amount could be substantial for the year.

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