There’s no place like home(stead)

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blog-author-clayjeffreys3

This post is specifically for any Georgia homebuyer who purchased their home in 2013 and is hearing the word “homestead” and thinking, “I have heard that word before, and I know it’s important, but I can’t quite remember why.”

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The state of  Georgia allows for a reduction in property taxes for a person’s primary residence known as the Homestead Exemption.  Here is why all this homestead information is important:

1.  In order to take advantage of the reduction in property taxes, you must complete and file your Homestead Exemption application with your county by the applicable deadline.  Check with your specific county for details, but most deadlines are the beginning or end of March.

2.  Because the exemption is based on the owner of title as of January 1st, you will not need to file until the first January that you have lived in the house.  For example, if you closed on your house on June 5th, you wouldn’t need to file until the following January.  Refinancing your property does not affect your exemption.  However, if you are adding or deleting a person’s name to the title, you will need to re-file for homestead.

3.  If you purchased a home from someone who was living in the property as their primary residence, it is likely that they had filed for the Homestead Exemption on the property.  This would mean that your current mortgage payment (and tax escrow payments) are based on the reduced taxes. Note that if you are purchasing a home from someone who has additional exemptions — a senior citizen exemption or veterans exemption, for example – your mortgage payment may start off unusually low. Once their exemption falls off the house the following year, your mortgage payment will be adjusted up.  More about this situation at the bottom of the post.

4.  If you purchase a property in which the owner did not have the Homestead Exemption, your tax bill and monthly mortgage payment will be based on the higher tax amount.  Once the new year arrives, you can file for the Homestead exemption. That said, your mortgage payment will not reflect the change in taxes until the county has issued a new tax bill for that calendar year.  Once the tax bill has been issued, you should send it to your loan servicer and request that they analyze your escrow account. This should, at a minimum, reduce your monthly payment. You may also be entitled to a refund from having too much in your escrow account.

5.  And possibly the most important . . . if you forget to file for your Homestead Exemption, you probably won’t notice anything until it is too late.

And here is why . . . Let’s say you purchased a house in March 2006.  The person you purchased the home from was occupying the house as their primary residence, so your monthly payment included $300 per month for your taxes.  In September of that year, the county issues the tax bill and the bill is paid by your loan servicer out of your escrow account.  The following year, the Homestead Exemption falls off the house and you miss the deadline to re-apply.  In September the county issues a new tax bill and again the bill is paid by your loan servicer out of your escrow account.  At this point, you will likely receive a notice from your loan servicer stating your tax bill has gone up.  The increase in taxes due is a result of a reassessed higher-value of the home by the county and because the home no longer carries the Homestead Exemption.  Because of this increase, and because your loan servicer has already paid the bill, you owe them $600.  In most situations, you can spread this payment out over the following 12 months, making your payment increase by $50 per month.  But, in order for the money in your escrow account to be available to pay the 2007 tax bills, your payment has to go up another $50 as well . . . for a total increase of $100 per month.  Ouch.  The following January you can file for Homestead, but your payment won’t be able to be adjusted down until the following year’s tax bill is issued by the county.

Add the confusion of new construction property taxes to a missed Homestead Exemption filing and you’ve may just find yourself clicking your heels together, wishing you could just go back . . . there’s no place like home(stead), there’s no place like home(stead).   

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