Lost the Homestead Exemption
If you are like me you probably didn’t know what the homestead exemption was and learned the hard way when you had a sudden increase in your property taxes. It was an expensive lesson for a first-time homebuyer the 2nd year owning the home. Let’s just say I paid more attention the next year when the colored papered came in the mail and that gives your yearly tax assessment for your property and the breakdown.
What’s funny is I actually read the assessment the year that the homestead exemption was removed but I didn’t know to understand what I was reading. I believe my realtor or lender mentioned the homestead exemption being in place when I was purchasing the property but like most new home buyers your mind is plugged in on the home inspection, the home inspector, and the home appraisal process. Really, who pays attention to underwriting right? You just want to know what the monthly payment is and close. Well if you are in an expensive housing area such as South Florida this oversight can cost you thousands of dollars.
When I purchased the home in 2018 the taxes were about $3500 and the home had a lower assessment from the last owners when they purchased. I noticed the home had lower taxes than the other properties in the area but being a new buyer I didn’t know how to ask the right questions. In 2019 we had our first assessment after purchasing and the taxes increased to $6000. Wow right, $300+ a month tacked onto our monthly payment. It was definitely an adjustment we had to work through.
The loan was underwritten with the prior homestead in place because it stays active until the next assessment period. Make sure you check to see if the home has a homestead exemption in place.
What is a homestead exemption?
In the state of Florida, a $25,000 exemption is applied to the first $50,000 of your property’s assessed value if your property is your permanent residence and you owned the property on January 1 of the tax year. This exemption applies to all taxes, including school district taxes.