Supplemental Property Taxes: What You Need to Know
Filed under: Mortgage News
With so many people buying houses right now in the state of California, it seems relevant to re-explain: what is a supplemental tax bill? If your loan officer doesn’t explain this to you, it might be a surprise to get a bill a few months (up to a year) after buying a house. This bill needs to be paid, so it’s important that you know what’s coming so you are ready when the bill shows up.
Why Are You Getting a Big Tax Bill?
Our property taxes are governed by Prop 13. When you purchase a home, the county reassesses the home based on the updated value. The timeline of this process varies depending on how busy they are. Right now, it’s taking a longer time for the tax bill to come through since so many people are buying homes this year. I bought a house 18 months ago, and it still hasn’t been reassessed.
Technically, the county views the value of the property when the sale closes as the new assessed value – whether or not it shows this new price in the tax records. The supplemental tax bill makes up the difference of the time from the day you close the house, until the county gets their stuff together to complete the reassessment and update your tax bill.
What to Watch Out For
Stuff happens all the time, so you need to be aware of a few important things to watch out for:
- Most loan officers will set up your taxes for the amount it will be after the assessment. That amount is going to be dropped into the impound account every month. We can take that supplemental bill and forward it to your mortgage company. They will be a month or two short, but many mortgage companies will actually pay it for you. It usually comes in two installments.
- If you get a check in the mail from the mortgage after the home closes – don’t spend that money without calling me first! What will happen sometimes is that the reassessment hasn’t happened yet, and the mortgage company thinks the taxes are much lower than they really are. So, the mortgage company does an audit (as required by law) and sends back money on the accounts that are overfunded. Eventually, the county will come to you asking for that money, which is why you should set that money aside in savings.
I try hard to keep my clients updated about the supplemental tax bill so you are ready to pay the bill when the county is looking for the money. Contact Bill Provost of Franklin Loan Center for more information on this or other mortgage needs. (425) 241-1922 or bill@homeloanpartner.com.
