How to Put Property Taxes Into the Home Loan?

Paying your property taxes along with your mortgage is called escrow.

Putting your property taxes into your home loan is a process called escrow. Your monthly mortgage payments include principal and interest, but many people add their property taxes and homeowner's insurance to their monthly loan payment. Some borrowers may even require that these amounts be escrowed to ensure they are paid on time. Setting up an escrow account for property taxes is easy to do.

Instructions

1. Contact your lender and let the company know you would like to add your property taxes to your monthly loan payment. You may have to go to your lender's office and fill out paperwork for the process. If you want to escrow your property taxes when you buy your house, let your lender know at closing.

2. Calculate what your monthly add-on will be for property taxes. To do this, simply divide your annual property tax bill by 12. If you are buying a house and want to know what the property taxes are, you can find out from your local tax assessor or registrar of deeds office. Many of these offices have this information available on their websites.

3. Pay any upfront reserve that your lender requires. Since property taxes can rise as often as annually, your lender may require that you have extra money in escrow to cover any increases. In other cases, your lender may simply adjust your escrow amount and raise your total monthly payment to cover any shortfall in the account. One to two months of tax payments is customary.

4. Check to make sure your property taxes are paid on time. Even though your lender pays your property tax bill when you escrow for it, it is still your responsibility to make sure the bill gets paid. Mortgages get sold to other banks and the servicing companies can change. These events can lead to mistakes and late payments.

Tips & Warnings

• If your lender doesn't require you to use an escrow account for your property taxes, consider whether it is worth it for you. Though it is more convenient, escrow requires you to stow away anywhere from several hundred to several thousand dollars annually that you don't earn interest on. You could put the same amounts of money into a savings account every month and earn interest.

• If you are having a new house built, make sure you ask your lender to estimate what your property taxes will be once the house is complete. Otherwise, the money you put into escrow will be based on taxes on the unimproved lot and unfinished house, which means your monthly payment will greatly increase the next year.

References

• State of Wisconsin: Commonly Asked Questions on Escrow Accounts Established to Pay Real Property Taxes or Insurance or Both
• Realty Times: Escrow Accounts: Who Needs Them and Why
• Bankrate: Escrow Makes Payments--Even on Fixed-Rate Mortgages--Variable