Property Taxes in Illinois and How They Affect Monthly Mortgage Payments

Property Taxes in Illinois: What to Expect

Property taxes in Illinois are calculated as a percentage of your home’s assessed value. On average, the state’s effective property tax rate is around 2.07%, though it can vary by county and municipality. In Cook County and its surrounding suburbs, rates are often higher. In rural areas, they may be slightly lower.

This means that for a home valued at $300,000, property taxes can reach or exceed $6,200 per year. That cost is not optional—it’s built into the cost of homeownership and directly affects how much house you can afford.

Unlike other states where schools and public services are funded through a mix of taxes, Illinois relies heavily on property taxes for local revenue. Schools, fire departments, and municipal services all depend on this funding, which keeps the tax burden high even if home values are modest.

How Property Taxes Influence Your Monthly Mortgage Payment

When you take out a mortgage in Illinois, your lender usually requires an escrow account. This account holds funds to pay your annual property taxes and homeowners insurance. Rather than paying a large lump sum once or twice a year, your property tax bill is divided into 12 monthly installments and added to your mortgage payment.

This combination of principal, interest, taxes, and insurance is often referred to as PITI. In Illinois, the tax portion can be significant. If your property tax is $6,285 per year, that adds about $524 per month to your mortgage payment—on top of what you’re already paying for the loan itself.

For borrowers, this changes affordability. A mortgage that looks manageable when you consider just principal and interest can become challenging once taxes are added. LBC Capital works with buyers to explain how escrow functions and helps estimate true monthly costs, not just the loan portion.

Escrow Accounts and Their Impact

An escrow account protects both the borrower and the lender. It ensures that your property taxes and insurance are paid on time and avoids penalties or lapses in coverage. But it also raises your monthly payment significantly.

Lenders often build in a cushion—typically two months’ worth of estimated taxes—to cover future increases. If your property taxes go up after a reassessment or local rate change, your escrow balance must adjust. That may result in a one-time payment to make up a shortfall or an increased monthly amount.

For example, if your taxes increase by $1,200 annually due to a property reassessment, that means an additional $100 per month just for escrow. These changes can catch homeowners off guard if they’re not explained clearly at the start. That’s why LBC Capital emphasizes education and transparency in every mortgage we provide.

Illinois Tax Rates: Why Are They So High?

Illinois ranks near the top nationally in property tax burden. The reason lies in how the state funds its local governments and schools. Illinois does not allow municipalities to collect local income taxes. As a result, cities and counties depend on property taxes to fund everything from police departments to road maintenance.

While there is a state-imposed cap on property tax increases through the Property Tax Extension Limitation Law (PTELL), that cap only applies to the tax rate—not the assessed value of your property. If your property is reassessed at a higher value, your tax bill will rise even if the rate stays the same.

Homeowners who remodel or build new homes often see significant tax increases. In some cases, a new home construction can lead to a tax bill that’s triple what was initially estimated. LBC Capital reviews local tax data for your area so that you’re not caught by surprise after closing.

Budgeting for Escrow and Taxes

When you buy a home, the upfront costs like down payment and closing costs often take center stage. But it’s the monthly payments that determine whether you can comfortably afford the property long-term. That’s why LBC Capital provides a complete breakdown of all monthly components, including escrow, from day one.

Your escrow contribution is recalculated annually. If the local tax assessor increases your home’s value or if the taxing authority increases rates, your escrow contribution will rise. LBC Capital helps homeowners prepare for this by offering scenarios and tools to estimate how changes in assessed value will affect monthly payments.

If you have enough equity in your home and meet lender requirements, you may opt to pay property taxes on your own, outside of escrow. While this gives you more control, it requires careful budgeting and timely payments. Many borrowers prefer the convenience and predictability of an escrow account, which is why LBC Capital includes it by default.

Real-Life Example: Mortgage Payment Breakdown

Imagine buying a home in Illinois for $300,000 with 20% down. Your loan amount is $240,000. At a 6.5% interest rate, your monthly principal and interest might be around $1,518.

Add to that:

• Property taxes: $6,200/year or about $517/month
• Homeowners insurance: estimated at $100/month
• Total monthly payment (PITI): $2,135

That’s over $600 more per month than just the mortgage payment. And if property taxes go up to $7,500/year, your monthly payment would rise to approximately $2,260.

LBC Capital walks every client through these calculations, so there are no surprises after closing. We use current tax data and offer realistic projections to protect your financial stability.

Planning for the Future

Tax increases are common. Home values often go up over time, and so do property taxes. Illinois counties typically reassess homes every three years. Even small improvements like a new deck or finished basement can trigger higher assessments.

LBC Capital helps clients plan ahead. We advise on how much to budget annually for escrow increases, and we can assist with appealing your assessment if you believe your home has been overvalued.

Many homeowners are surprised when their mortgage payment rises unexpectedly due to escrow adjustments. That’s why it’s important to choose a mortgage partner who offers more than just a loan. LBC Capital provides guidance long after your loan closes.

Why Work with LBC Capital

LBC Capital specializes in helping Illinois homebuyers navigate the complexities of high property tax markets. We provide upfront, transparent information on how taxes will impact your mortgage payments and explain every part of your escrow account.

Our team knows the nuances of Illinois’s tax laws and helps you avoid costly surprises. Whether you’re buying your first home or refinancing, LBC Capital ensures that you understand every element of your monthly payment.

We don’t just process mortgages—we build long-term relationships with clients by offering expert advice and ongoing support.

Final Thoughts

Property taxes in Illinois play a major role in your total cost of homeownership. With some of the highest tax rates in the nation, these costs significantly affect your monthly mortgage payment. Whether you’re buying a new home or managing your current loan, understanding how taxes factor into your monthly budget is critical.

LBC Capital offers the insight and experience you need to plan wisely. We help you calculate realistic monthly payments, prepare for tax increases, and choose the right escrow options. When you work with LBC Capital, you’re not just securing a mortgage—you’re gaining a partner in long-term financial success.