Annual tax assessed by your local government (usually county) based on your home's value. Rates vary by location — from about 0.3% to 2.5% of value per year.
Property tax is the annual tax your local government (typically county, sometimes also city or school district) levies based on the assessed value of your home and land. Rates vary dramatically by location — from 0.3% in low-tax states to 2.5%+ in high-tax areas.
Your lender almost always collects property taxes through your escrow account — 1/12 of the annual bill added to each monthly mortgage payment. The lender pays the tax bill on your behalf when it comes due.
Property taxes can change. The assessed value typically gets reviewed annually or every few years, and rates can adjust based on your local government's budget. Some states cap how much annual increases can be (California's Proposition 13 is the classic example). Property taxes also adjust each year your escrow account is analyzed, which can cause your monthly payment to fluctuate even on a fixed-rate mortgage.
Example
Your $400K home in Texas has an effective property tax rate of about 2.0% — that's $8,000/year, or about $667/month added to your mortgage payment through escrow. In Hawaii (effective rate ~0.3%), the same home would cost about $1,200/year.
Also known as
real estate tax, property tax bill, real property tax