Property tax is the annual bill your city or county charges on your home, based on its assessed value and the local tax rate. It funds schools, roads, and fire departments — and it never goes away, even after the mortgage is paid off.
For borrowers, the key detail is that most lenders collect it monthly through an escrow account: your servicer adds one-twelfth of the estimated annual tax to each payment, then pays the bill for you when it comes due. That's why two houses at the same price can have very different monthly payments — tax rates vary widely by state and even by school district.
A concrete mechanic: when your home is reassessed at a higher value, next year's tax rises, your escrow account runs short, and your monthly payment goes up — even on a fixed-rate loan. Read more in escrow, taxes and insurance, or plug your local tax rate into the mortgage calculator for a realistic payment estimate.