Saving money is an easy goal to make, but not an easy goal to keep. You start off by trying to cut down on the superfluous spending, such as going to the movies, eating out on weekends or shopping at high-end stores. But did you know you there are ways you can save money on mortgage taxes and fees? By requesting a reassessment, canceling PMI, or taking advantage of exceptions permitted by law, you can significantly reduce your tax payments.
Requesting a Reassessment
In Arkansas, taxpayers have the right to appeal an assessment of their property if they disagree with it. If you appeal for a reassessment of your property and it turns out your property was originally assessed too high, you could have the property revalued at a lower level and therefore pay less taxes. The process of appeal is as follows:
- A taxpayer files a petition with the county Board of Equalization.
- A hearing is held and the protestor has the burden of presenting the information and evidence as to why he disagrees. (Example: Protestor can assert the assessment increased considerably without improvements to the property, or increase in comparable properties).
- The Board of Equalization will make a decision and provide notice to taxpayer.
- If the taxpayer is not happy with this decision, he or she has a right to appeal to the county court in which he can again make his argument.
The costs to do this could be minimal if the taxpayer handles the process himself. A third party (i.e. lawyer) may appear on behalf of the taxpayer and present the information. Obviously, the expense associated with hiring the attorney would be dependent on how much research and information gathering were required.
Canceling Your PMI
PMI stands for “Private Mortgage Insurance” and is an extra fee you will usually have to pay on your monthly mortgage bill if your down payment is less than 20 percent. At the beginning of a purchase loan, PMI is calculated from the lesser of the appraised value or purchase price.
On most loans, the PMI will automatically be discontinued when the loan-to-value ratio reaches 78 percent of the original value of the mortgage, though not all lenders will automatically take it off. Once you pay 80 percent of the original loan-to-value ratio, you can request discontinuation of PMI.
If you live in an area where you believe the value of your home may have increased significantly from the time you purchased the property, then you might consider having the property reappraised and requesting the removal of PMI based on the new appraised value.
NOTE: It is recommended that you check with your lender to find out their specific policy for early PMI termination before ordering any new appraisal.
Exceptions Permitted by Law
There are a few provisions in the law to keep you from paying the full mortgage tax or fees. If you are over 65 or disabled and you purchased or constructed a homestead, the assessed value may not increase above the amount it was assessed at immediately before it was bought or constructed. In other words, the amount of your assessment and tax amount will never increase. This means seniors and disabled persons who may be on a fixed income do not have to worry about an increase in their taxes.
In some states, such as Arkansas, a simple way to save money on your real estate property taxes for the property that is your principal place of residence is to claim a homestead exemption. After you acquire the property, you may file the exemption with the county assessor. The current homestead exemption in Arkansas is an amount up to $350. This means that if the annual property taxes are less than $350, the new homeowners are not required to pay real property taxes on their homestead.
If you need more information on what the law says concerning your mortgage taxes, property assessment or house payments, give us a call or email us. We are a statewide title agency in Arkansas dedicated to giving you the best and fastest experience in handling your title reports, title insurance, closing and escrow.