Securing a mortgage is a significant step in the home buying journey, and avoiding common…
Whether you are a first time homebuyer or a seasoned purchaser, you will still need to learn and understand your property taxes.
Property Taxes Included in Mortgage
Most mortgages have property taxes included in the monthly payment. The payment is broken down into Principle, Interest, Taxes, and Insurance (PITI). Your lender will work with you to understand this breakdown.
If your property taxes increase, this can increase your monthly mortgage. Most of the time, your mortgage company will pay the higher taxes on your behalf and then adjust your monthly payment to reflect the higher amount. They do this annually and always provide a notice. You may also have the option to make a one-time payment to keep your monthly payment the same.
While you can’t lower your property taxes (unless you vote or get involved in the local government branches that determine property taxes), you can lower your monthly mortgage payment by refinancing to more favorable terms or making extra principle payments.
Paying Property Taxes Separately
Once you pay off your mortgage, you will still need to pay property taxes and insurance. Taxes are usually paid quarterly directly to your local government authority.
If you buy your house outright or do not use traditional financing, you can also pay your taxes separately. Most towns and cities have a tax collection office that keeps track of the amount and payment status. You can often make payments online, in person, or through the mail.
It does not happen often but some lenders do let you pay property taxes separate from your mortgage payment. This requires that you do keep track of your quarterly payments to make sure that they are paid on time. It is generally easier to let your lender do this on your behalf. Some lenders or locations even require it.