Moving to These 5 States Could Send Your Property Taxes Skyrocketing

Don't make a move without checking out this list.

When you buy a home, you need to plan for more than just your principal and interest payments on your home loan. You will also have to be ready to cover property taxes as well.

Some mortgage lenders require you to add property taxes onto your mortgage payment. If that's the case, then they keep the money in escrow and pay the bill for you when it is due. But even if your lender doesn't require this, you need to be prepared to pay your annual property tax bill.

Since you need to be ready to cover your property taxes, it's important to realize that there is a lot of variation in tax rates across the United States. And residents of some states face far higher tax burdens than others.

In fact, if you live in, or move, to any of the following five states, you can expect to pay taxes at a very high rate.

1. New Jersey

Residents of New Jersey will pay more in property taxes, on average, than individuals living anyplace else in the country. According to the Tax Foundation, New Jersey residents pay an average of 2.21% of their housing value in property taxes each year.

New Jersey is one of the only two states where the effective property tax rate is above 2.00%. It's also more than double the 1.08% effective tax rate homeowners pay across the U.S.

2. Illinois

Illinois is the second of two states where effective property tax rates come in above 2.00%, along with New Jersey. Residents of Illinois will pay 2.05% of their home value. This is based on 2020 data from the tax foundation.

Property tax rates are very high in Illinois due to the fact Chicago residents pay a fortune in these taxes due to pension debt. There are eight pension funds in Chicago alone that have accumulated close to $45 billion in debt. And across all of Illinois, governments have $63 billion in total pension debt that residents have to pay.

3. New Hampshire

New Hampshire is third on the list of states where there are substantial property tax bills homeowners must pay each year. In New Hampshire, the effective property tax rate is 1.96%.

4. Vermont

Vermont residents also face a substantial property tax burden. The effective tax rate is 1.82% of home values in Vermont.

5. Connecticut

Finally, in Connecticut, residents pay an effective tax rate of 1.76% of home values. The Tax Foundation also found Connecticut homeowners pay 20% more taxes, as a percentage of housing value, than residents of neighboring New York and 50% more than Massachusetts homeowners.

Don't forget to consider taxes when shopping for a home

If you move to these five locales, you can expect that your property tax rate will be especially high. But no matter where you live, you must take taxes into account when you decide how much home you can afford.

These taxes can add a lot to your monthly housing costs and many renters don't realize just how big of a burden they can be when they start shopping around. Make sure to research these costs so you can make informed choices about whether a home you're considering is affordable once all expenses are taken into account.