Last week, we talked about where your property taxes go. This week, we’ll talk a little about how they are paid, which for most homeowners is a line item on their mortgage statement.
For most borrowers, holding property taxes in escrow is required by the lender. Some lenders who will let you do it still discourage it by charging you more interest. Today, though, most banks won’t even give you the option of not having an escrow account unless you can prove you have a certain amount of funds on hand or you have a certain amount of equity in your home, usually 20 percent.
No matter what state you live in, if you have a mortgage, chances are pretty good that your lender pays your property taxes through an escrow account. In fact, many people never even become aware of the monthly allocation until their mortgages are paid in full and they are directly responsible for paying the property taxes themselves.
Even if your bank pays your personal property taxes, you should receive a copy of the bill at least once each year, whether you pay your property taxes directly to the tax authorities or through your mortgage lender.
Always keep the latest copy of your tax bill where you have easy access to it. You never know when you might need it to prove residency. For example, some school districts require it when you enroll the kids in school, particularly if you're enrolling them in a new school. And you'll ALWAYS need it to do your income taxes, too!
The obvious reason to use an escrow account is, quite honestly, convenience. Simply adding it to your mortgage payment, not worrying about the paperwork, ensuring that it is paid on time... it honestly negates any cons related to escrow.
Some people who own their home continue to use an escrow account because they can set it on autopilot and don’t have to worry about making the payments when they are due.
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