What would be the point? If if for some reason the bank was responsible for some % of the tax, do you think they wouldn't just pass it on to you by adding it to your mortgage payment?

THAT actually is the crux here. The question is terribly naive as it assumes the bank would not just add it back to the monthly payment anyway.

@brhans what if the mortgage amount was $200,000, but the property tax was $10,000/year (because it's a nice waterfront area or something)? Over 30 years (assuming the tax rate doesn't change), that's $300,000 you've paid in taxes...if the bank were to incorporate that into the plan, that's like an 11% interest rate

@brhans, in fact, don't most lenders do that with property tax?

@PersonX - good point - yes.

This is a fair question. OP is just under a common misunderstanding. Not sure why it is being down voted.

"ownership" is a slippery concept, and is entirely mediated by sovereign powers. banks (which exist utterly under government fiat) treat the house as something "they" own when it's useful to them / the government, and they treat it as something "you" own when that is useful to them / the government. If you don't like any of this - start your own country.

It's worth noting that regarding the house / land. The government entirely owns it - that's why you pay them rent. (They use the word "property tax". I guess those are interesting words.) Stop paying the rent, the government will generally kick you out.

In USA, it is typical for the bank to pay the taxes, but the contract says that they do it from an Escrow account that the buyer must keep funded as a portion of the monthly payment.

Related: Am I considered in debt if I pay a mortgage?

@Fattie I think it's telling that a lot of people complain about this sort of stuff, but nobody is out there actually starting their own countries and succeeding...

Hi @Michael on the contrary (A) a number of jokers have tried to set up private countries or at least toyed with the idea (eg Sealand, etc) (B) don't forget there is a relatively huge underground movement of "PT" people. (Who basically "keep moving" to achieve the same effect.) But most overwhelmingly, (C) we live in the so called "tax 'haven'" era. Where corporations (and to a smaller extent, some smart people) simply live in the less heinous jurisdictions (whether Monaco, HK, Seychelles or whatever). Every single bank you've ever dealt with is a Nederlands Antilles company, which is funny.

(It's totally hilarious that the industry which utterly overwhelmingly uses jurisdiction shopping is - of course - banking. It's just .. funny. Guess who knows the most about such money matters? :) ) So yeah while there is not much "start a country" action, we indeed live in the era of "jurisdiction shopping". 90% of (significant, rich) people do it and 100% of banks do it and 90% of large corporations do it. it's ubiquitous, it's the era we live in. Who wants to pay tax? Just move.

@Fattie what are "PT People"?

You have to pay the property taxes for the same reason you have to pay for the electricity, gas and water bills.

As a curiosity for overseas readers, it's perhaps worth noting that in the US experience, in almost all regions, almost all of the property tax goes to pay for the local school system.

FYI, you should use "paid" (past tense of pay). "payed" doesn't make sense here.

Do they get to use 80% of the house?

@Fattie, no not "almost all". e.g. 52% where I live does on schools. Property tax also goes towards city and county administration, emergency services etc.

I think the actual question OP has in mind is that a "property" tax should be a tax on net "property"/assets (wealth tax). Most property taxes are in that sense actually a misnomer because they are usually just a real estate tax.

@TomBaxter Not really, you pay the property taxes for the same reason you pay the taxes on electricity, gas and water. Theft when they are double taxation on top of IRS.

@Fattie Saying that property tax is a form of rent is an interesting social and political argument, but not a useful idea for day to day finance. It's like saying that everyone is a slave of the government, because we are forced to work circa 25% of our time with all of our income for that time going to the government. I have libertarian leanings and I sympathize with the point, but not literally true.

@fattie "Every single bank you've ever dealt with is a Nederlands Antilles company" Umm, I do my banking at Fifth Third, which is incorporated in Ohio. Most of my retirement money is in Wells Fargo, which is incorporated in California. I don't doubt that many banks are legally headquartered overseas for tax purposes, but certainly not all.

(@Jay - sure, not "literally every", it was an exaggeration! :) But major banks are the overwhelming users of so-called tax havens - which is funny.)

The question is based on a completely incorrect premise; it is not in any way true that "the bank technically owns 80% of the house" for a standard mortgage. If your question is about mortgages constructed to get around the prohibition in Islam about paying interest, then state the question more clearly. As it is, this question should be closed as it is based on a faulty premise.

Actually, in The Netherlands, we have a system where you get a tax break for having a mortgage. (It's not as straight forward as you suggest, as you get a deduction on your income tax based on the height of your mortgage.) The result is a pretty weird situation where it's advantageous to have a mortgage and where we have higher mortgages than anywhere else in the world.

@Jasper We get a tax break in the US for having a mortgage also. You can subtract the interest you paid on the mortgage from your income before calculating your taxes. Not the principle, just the interest. I have a mortgage and I benefit from this, but it seems a goofy rule to me. Why should someone in otherwise equal circumstances by higher taxes because he is renting rather than owning? But I guess that would be a different question.