Will My Property Taxes Change When I Refinance?

by John Desimone

You have your eye on an interest rate that will save you some cash. It's time to refinance. You fill out the paperwork and turn it in, thinking of all the things you can do with the money you'll save. Then it hits you. The appraisal will reflect a rise in value. Will the new loan trigger a reassessment and cause your property taxes to go up? To answer that question precisely, it depends on what state you live in and the balance of the new loan.

Property Tax Assessments

According the Lincoln Institute of Land Policy, property tax assessments in all states are calculated at 100 percent of market value. These assessments are done annually. In 20 states, laws limit the amount of increase from 2 to 10 percent on an annual basis. No transfer of title is required to trigger a reassessment in all states except one, California.

Refinance Mortgage and Reassessment of Property Taxes

While county tax assessors don't have access to your private appraisal, they do have access to your mortgage data. Your new mortgage balance from a refinance is entered into the tax assessor's database. If it rises above the current assessed value, the assessor can use it to calculate your annual property tax. Except in California.

California Tax Assessment Policy

In California, all property is assessed at 100 percent of market value, but reassessments occur only after the transfer of title or after the completion of new construction, such as a significant remodel. Also, annual increases are limited to the lessor of 2 percent or the rate of inflation. These limitations came about in 1978 as the result of the Proposition 13 tax revolt. Though they've been challenged in court several times, the law has held up and will not likely change in the future.

A Refinance May Not Hurt You

When the values of residential property begin to rise, a refinance could trigger a reassessment of your home. But if the value of your home stays steady or if you live in California, chances are a new mortgage won't affect you at all. When in doubt, talk to your financial adviser.

About the Author

John DeSimone is a published fiction and nonfiction writer. He has contributed to regional newspapers and authored several books. DeSimone also teaches writing at two universities in Southern California.

Photo Credits

  • Jupiterimages/Photos.com/Getty Images