A homeowner’s ability to pay property taxes is integral to his or her reverse mortgage eligibility and may even affect how much home equity can be tapped. But because property taxes vary from state to state, some homeowners may need to pay more to meet this mandatory obligation than others.
Depending on a person’s financial situation, the payment of property taxes and other obligations, such as homeowner’s insurance, could require some reverse mortgage applicants to set aside a portion of their tappable home equity to cover these ongoing expenses throughout the life of the loan.
The average American household spends $2,127 on property taxes for their homes each year, according to U.S. Census Bureau data recently spotlighted in a WalletHub analysis of state property tax rankings.
To determine real estate property tax rates, WalletHub analysts compared the 50 states and the District of Columbia using U.S. Census Bureau data; dividing the “median real estate tax payment” by the “median home price” in each state. Analysts then used the resulting rates to obtain the dollar amount paid as real estate tax on a home worth $175,700, which is the median value for a home in the U.S., according to the Census Bureau.
In ranking states, WalletHub divides the data across the categories of effective real estate tax rate; the annual taxes paid on a $176,000 home (approximately the median U.S. home value); the state median home value; and the annual taxes paid on a home priced at the state median home value.
Sitting at the top of the ranks is Hawaii, which according to WalletHub has an effective real estate tax rate of 0.28%. At this rate, the annual taxes on a $176,000 home would be $489. The median home in the Aloha State, however, is far greater at $504,500. In that case, the annual taxes paid on a home of that worth would be $1,405.
Alabama ranks second with a real estate tax rate of 0.43%, which at this rate would equate to $769 in annual taxes paid on the median U.S. home value. The median home price in the state, however, is $123,800. As such, annual taxes would amount to $538.
Also down south, Louisiana completes the top-three states with a real estate tax rate of 0.48%. On a home valued at the state’s median price of $140,400, annual property taxes are $672.
In New Hampshire, which has a tax rate of 2.1%, the state’s median home value of $237,400 amount to annual property taxes of $4,996.
For Illinois, which has a median home value of $175,700, according to WalletHub, annual property taxes at the state’s rate of 2.25% could run up to $3,959.
As for New Jersey, the state’s tax rate of 2.29% could cost $7,335 in annual property taxes for its median home value of $319,900.
Written by Jason Oliva