Property tax rates vary widely by state and county — from 0.27% in Hawaii to over 2% in New Jersey and Illinois. The national average is around 1.1% of home value per year.

Lenders typically collect 1/12 of the annual tax bill each month and hold it in escrow, paying the tax authority when the bill comes due.

Property taxes fund local services like schools, roads, fire departments, and parks. They're tax-deductible up to $10,000 per year (combined with state income tax under the SALT cap).