Buying your first home in Montgomery County is exciting, but the price of the house is not the only part of what you will pay.
Property taxes can make a real difference in your monthly payment, and they can vary from one neighborhood to another
Here is what every first time home buyer should understand before buying
How Property Taxes Work in Montgomery County
There is no single property tax rate for every home in Montgomery County TX.
Your home may be taxed by several local government entities. These can include Montgomery County, your school district, a city, a Municipal Utility District, commonly called a MUD, and other special districts.
That means two homes that both cost $400,000 can have different property tax bills.
Before buying a home, find out which taxing entities apply to that specific property.
How MCAD Determines Your Property Value?
The Montgomery Central Appraisal District, commonly called MCAD, appraises property for tax purposes.
You may see three important numbers:
Market value is MCAD's estimate of the property's market value.
Appraised value is the value after applicable appraisal limitations are considered.
Taxable value is generally the value remaining after applicable exemptions are deducted. Taxing units apply their tax rates to the property's taxable value.
These numbers can be different.
Your Monthly Payment Can Change
Many first time buyers pay their property taxes through an escrow account managed by their mortgage company.
Part of each monthly payment goes into escrow. The mortgage company then uses that money to pay property taxes and homeowners insurance.
This is important to understand:
Having a fixed rate mortgage does not guarantee that your total monthly payment will never change.
Your principal and interest may remain fixed, but your escrow payment can increase or decrease as property taxes and insurance costs change.
The Seller's Tax Bill May Not Be Your Tax Bill
This is one of the biggest mistakes a first time buyer can make.
The seller may have exemptions or other tax benefits that will not apply to you. The property's taxable value can also change after the sale.
Before buying, ask for estimate of what the property taxes could look like after you own the home.
Don't Forget the Homestead Exemption
If the property becomes your principal residence and you meet the requirements, you may qualify for a Texas residence homestead exemption.
Texas currently requires school districts to provide a $140,000 residence homestead exemption. Other taxing entities may offer additional exemptions.
For example, if a qualifying home has an appraised value of $400,000, the $140,000 school district exemption would reduce the value subject to school district taxes to $260,000 before considering any other applicable exemptions.
The exemption does not mean the home is worth $140,000 less. It reduces the value used to calculate that portion of your property taxes.
What About the 10% Homestead Cap Works
Once your home qualifies for the homestead appraisal cap, its appraised value generally cannot increase by more than 10% per year, although certain new improvements can be added.
Your home's market value can still increase by more than 10%.
That is why MCAD may show a market value that is higher than your appraised value.
Check Your MCAD Property Record
After buying your home, check your property record with the Montgomery Central Appraisal District.
Make sure the owner's name, square footage, lot size and property improvements are correct.
If something looks wrong, don't assume it will fix itself. Texas property owners have the right to protest certain appraisal district decisions.
The Bottom Line
When shopping for your first home in Montgomery County, don't ask only:
"How much is the house?"
Also ask:
"What will this house actually cost me each month?"
Property taxes, insurance, HOA fees and MUD taxes can make a meaningful difference in the true cost of owning a home.
Understanding those numbers before you make an offer can help you choose a home that fits both your lifestyle and your budget.
