Property taxes are due twice a year in April and December. The county in which you purchased a home sends out these tax bills in accordance with the annual property taxes. If you’re a homeowner here’s what you need to know and how property tax bills relate to them being due.
There are a few different categories you may fit into.
You bought a home within the last 12 months:
This category is probably the most likely. If you bought a home in the last 12 months using mortgage loan financing and you have an escrow account to pay the taxes and the insurance twice a year when they’re due, you need not worry. The mortgage company collapse for principal interest taxes and insurance within your monthly mortgage payment. Then they automatically pay the taxes twice a year when they’re due. Therefore, when you bought your home at the closing table the lender estimated for a future month of taxes and insurance so they had enough money to build a savings account if you will that they used to pay the taxes and the insurance twice a year when they are due for you.
The county in which your home is not made privy to the fact that you have an escrow account to pay the taxes when they are due so as a result your lender is going to pay the property taxes for you even though you receive a bill from the county which you can most often ignore since the lender is already accounting for the taxes within your monthly mortgage bill that you receive anyway.
One caveat to this is that you will receive a supplemental property tax bill which is a separate tax bill. This is the difference between your cost basis and the seller’s previous basis. This usually comes within 12 to 16 months after you buy a home, it’s a 1-time thing to get caught up with the county tax roll. The escrow accounts your mortgage company has for you is not designed to pay this, it is recommended that you pay this on your own with your own funds. If you use the escrow account to do it that will cause a shortage which could subsequently result in a higher monthly mortgage payment.
You recently refinanced:
This is also similar, if you have an escrow account with your mortgage company you don’t need to worry about the property taxes being paid. The mortgage company pays them for you. Your new mortgage company will pay them for you, and we’ll make sure that if you desire to have a national account on your mortgage at supplement meeting at closing then they will be paid for in the future. If you had an escrow account with the previous mortgage that you paid off the money in that escrow account will be coming back to you usually post-closing within about 2 to 3 weeks and that’s real money that you can spend or deposit or use however you wish.
If you are purchasing or refinancing a house at all and you’re in the process of securing new mortgage financing for either purpose, or you’re doing that transaction any time between October to December, the 1st installment of taxes must be paid. The reason being is because the mortgage company will not let your loan close unless that is accounted for. So in a purchase transaction it’s a prorated figure based on how long the seller has the house for in relationship to when you purchase it. On a refinance, even if you have an escrow account for taxes and insurance, the 1st installment of taxes also must be accounted for because technically, they’re due from November 1st to December 10th. Make sure you’re aware of this when you’re doing a mortgage transaction, so you don’t get a surprise. This is something a good lender should tell you in the early stages of the process so you can plan accordingly. Regardless, you would get refunded that money from your previous lender who is getting paid off. If it becomes a timing thing where they pay the taxes for you the new lender would jesting a receipt to show the 1st installment of taxes is paid.
If you’re looking to purchase or refinance a house and want to understand more about how taxes work or just looking for a competitive rate you can start online today.
Start with a no-cost loan quote today!