Understanding Escrow Property Taxes
When you purchase a home, one of the many expenses you’ll encounter are property taxes. These taxes are typically paid annually to the local government and can vary depending on where the property is located and its assessed value. Some homeowners choose to pay their property taxes directly to the government when they are due, while others opt to have them included in their monthly mortgage payments through an escrow account.
What are escrow property taxes?
**Escrow property taxes are a portion of your monthly mortgage payment that is set aside by the lender to cover your annual property tax bill. Lenders hold this money in an escrow account and make the tax payments on your behalf when they are due. This ensures that the taxes are paid on time and helps prevent tax liens from being placed on the property.**
FAQs about Escrow Property Taxes:
1. How are escrow property taxes calculated?
Escrow property taxes are typically calculated based on the estimated annual property tax amount divided by 12. This amount is added to your monthly mortgage payment.
2. Can I opt out of having escrow property taxes included in my mortgage payment?
Some lenders may allow you to pay your property taxes directly to the government instead of through an escrow account, but this is not common.
3. What happens if there is a shortage in my escrow account for property taxes?
If there is a shortage in your escrow account to cover your property taxes, your lender may give you the option to pay the difference in a lump sum or increase your monthly mortgage payments to make up for the shortfall.
4. Can I cancel my escrow account for property taxes once it’s been established?
In most cases, you cannot cancel your escrow account for property taxes once it has been established without paying off your mortgage in full.
5. Are property taxes the only expenses that can be included in an escrow account?
In addition to property taxes, escrow accounts can also cover homeowners insurance and mortgage insurance premiums.
6. What happens to the money in my escrow account if I refinance or pay off my mortgage?
If you refinance or pay off your mortgage, any remaining funds in your escrow account will be returned to you by your lender.
7. Can I choose which expenses are included in my escrow account?
Lenders typically set up escrow accounts to cover property taxes, homeowners insurance, and mortgage insurance, but you may be able to negotiate to have other expenses included as well.
8. Can property taxes increase the amount of my monthly mortgage payment?
If your property taxes increase, your lender may adjust your monthly mortgage payment to ensure there are enough funds in your escrow account to cover the higher tax bill.
9. Are there any benefits to having escrow property taxes included in my mortgage payment?
Having escrow property taxes included in your mortgage payment can help you budget for your annual property tax bill and ensure that the taxes are paid on time.
10. What happens if I miss a payment on my escrow property taxes?
If you miss a payment on your escrow property taxes, your lender may step in to pay the taxes on your behalf to prevent any penalties or tax liens from being placed on the property.
11. Can I change how much money is deposited into my escrow account each month?
If you believe that your escrow account is overfunded or underfunded, you can request a review from your lender to adjust the monthly amount deposited into the account accordingly.
12. How do I know if my property taxes are being paid on time through my escrow account?
You can check with your lender or local government to verify that your property taxes are being paid on time through your escrow account. It’s important to stay informed and ensure that your taxes are up to date to avoid any potential issues.
In conclusion, escrow property taxes are a convenient way for homeowners to manage their annual property tax bills and ensure that they are paid on time. By understanding how escrow accounts work and what expenses they cover, homeowners can better budget for their housing expenses and avoid potential issues with tax payments.