Graham Stephan Warns That 'Property Taxes Only Go Up With Time.' Here's How to Account for That

It's one expense you can't easily control.

When you buy a home, you take on a lot more than just a mortgage loan. You also sign up for the many expenses that go along with one, like homeowners insurance premiums, maintenance, repairs, and property taxes.

Property taxes can be a huge expense, though. In some cases, you might actually spend more on your property taxes than your mortgage itself.

Worse yet, property taxes have the potential to rise. In fact, real estate expert Graham Stephan insists that "property taxes only go up with time." That's something you need to know as a home buyer -- and prepare for accordingly.

Pad your budget and don't go overboard

Maybe you can afford a $300,000 home in your neighborhood that comes with a $4,000 annual property tax bill. But what if your property taxes increase to $4,500 next year, and $5,000 a few years after that?

Homes are assessed on an annual basis in some parts of the country. And property taxes are calculated by taking a home's assessed value and multiplying it by its local tax rate. So if your home gains value, your property taxes could become more expensive.

Keep in mind that your home might simply gain value over time because real estate tends to gain value in general. But your home might also see its assessed value increase following improvements you make. These could include things like adding a deck, finishing the basement, or renovating the kitchen.

That's why it's important to assume that your property tax bill will increase in time -- and to plan for it. In this example, you might decide to limit yourself to a $275,000 home instead of one that costs $300,000 so you're spending less on a mortgage and have more room to allow for an uptick in property taxes.

Know that you have the right to appeal

Property taxes have a tendency to rise over time, but that doesn't automatically mean you're always going to have to absorb those increases. You're allowed to appeal your property taxes each year, and when you do, what you're actually appealing is the assessed value of your home.

If you can prove that your home has been assigned a higher value than it's actually worth, then it gives you a leg to stand on in the context of a property tax appeal. So let's say you haven't made improvements to your home since buying it, but your neighbors have all finished their basements over the past couple of years. If you see that your home is assessed at a value of $325,000, as are theirs, but yours is missing that finished basement and is otherwise comparable, it gives you an argument to make.

An even better argument is to find homes that are very similar to yours in your neighborhood that recently sold at a lower price than your assessment. If a very comparable home around the corner sells for $305,000 when yours is assessed at $325,000, you can use that lower sale price to argue down your assessment -- and pay less in property taxes.

All told, though, your property taxes could increase a lot in the course of paying off your mortgage. That's an expense you'll want to plan for -- especially since you can't assume you'll win your appeals.