Escrowing property taxes is prevalent in the United States. Here, you will learn how it works and whether it’s an option.
What Does It Mean To Escrow Property Taxes?
Crowding property taxes is a simple and useful tool for many property owners. When you escrow your property taxes, your lending company will assess an extra amount over and above your monthly mortgage payment. Your monthly mortgage statement will delineate the amount and the fact that it is to be escrowed. These payments are placed into an escrow account, which accrues and remains until it is time to pay your property tax bill.
Over time, you will have paid enough in small amounts to cover the taxes. When tax bills are mailed out, your mortgage company will receive and spend the actual billed on your behalf. You will receive a notice of property taxes due from the taxing body. You’ll also be informed when your taxes have been paid.
Many mortgage lenders require their clients to escrow their taxes, much like they require title insurance. When setting up your mortgage payment plan with your lender, you’ll learn whether or not you’re required to escrow your taxes. If you are not required, you may opt to do so anyway.
To Escrow Or Not To Escrow?
Es crowing property taxes are popular for their simplicity and ease of use. Rather than remembering to save money for property taxes on your own, it is already written into your mortgage payment. Paying a small portion of the monthly taxes is often preferable for many people to come up with thousands of dollars in property taxes when they are due. An added benefit is that your mortgage lender also takes care of physically paying the taxes. You do not have to worry about getting funds out of an account and then getting them to the appropriate taxing body.
On the other hand, some property owners do not escrow their tax payments. Firstly, their lender does not require these individuals to do so, or they may not have a mortgage. They also do not have trouble coming up with tax payments when the bill arrives, or they prefer to save the money on their own and earn interest in a private banking account.
Consider Your Money Habits
There is no right or wrong choice. It comes down to your personality, spending, and payment habits. If you’re not a saver, are lax in your bill-paying, or know you won’t have the lump sum available for your taxes when they are due, then you are probably better off escrowing them.
If you are a conscientious saver, don’t see a problem with having the lump sum available at tax time, or prefer to handle tax payments independently. You may choose not to escrow your property tax payments.
Your lender can advise you about your options regarding property tax escrow. If you have a choice, carefully weigh the pros and cons and ensure it is your best decision.