What happens to my property taxes when I pay off my mortgage? I am finally done paying off my mortgage, but I’m wondering if my property taxes will change. Will my real estate taxes change or will my property be reassessed after making my last mortgage payment?

Q: I’m just about to pay off my mortgage. I’ve been waiting for this day for a long time. But now I’m wondering if my property taxes will change or my property be reassessed after I pay off the mortgage?

A: Congratulations on reaching this major milestone. Few mortgages get paid off because the owner has made regular payments over a long period of time. Most mortgages get paid off because the owner has refinanced or has sold the property.

Your real estate taxes should not change in any way due to paying off your loan – or taking on a new loan for that matter. Local governmental taxing bodies (like your county assessor’s office) base real estate taxes on the value of a property. The way they come up with that value can be confusing, complicated, convoluted, unfair and in some cases strange and illogical, but in the end, the value they come up with for your property shouldn’t take into account whether you have a mortgage on the home.

The elements that go into determining the value of your home generally include the following: the sales prices for home in your neighborhood, the size of your home, your home’s type of construction (brick, stone, wood), the number of bedrooms, bathrooms, size of garage, attics (finished or unfinished), basements (finished or unfinished), the size of the lot on which your home sits, frontage to a lake, street, park or other distinguishing feature. There may be other characteristics, such as the age of the property (a newer home may have a higher assessed value than an older home of the same size), what improvements you’ve made to the home and the condition of your home, that also factor into the valuation.

In some instances the government office has the ability to freeze or limit the increases in your assessment or reduce your assessment based on the length of time you have live in the home, your age, your income, whether it’s your primary residence or not, whether the home has been named historic, and other legislative mandated considerations.

We know there are states that have a tax on mortgages. That is to say that when you take out a mortgage you will pay a tax that may be based on the value of the mortgage, but we are unaware of any real estate tax assessor’s office (or other applicable local taxing body) that uses the fact that a home has a mortgage on it to affect the value of your home.

On the plus side, now that your mortgage is paid off, you won’t have to make those monthly mortgage payments, you will own your home free of any mortgage and will have that much more money in the bank going forward. Thanks for your question.