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Mortgage Servicing Companies: How Are My Property Taxes Paid?

Posted by Ella Baldwin on Jan 24, 2023 1:13:02 PM
Ella Baldwin


One financial obligation that comes along with homeownership is the responsibility to pay property taxes. Fortunately, your mortgage servicing company can make this easier. Did you know that if you choose to escrow, part of your monthly mortgage payment may include your projected property tax for the year? If you choose to escrow, your mortgage company collects a portion of your projected tax and insurance bill each month and then pays it on your behalf to the parish, county, or city where your home is located. Although your mortgage servicer will remit funds for the tax bill, you will still receive a property tax bill in the mail.

Why Does My Mortgage Servicer Pay My Property Taxes?

If you choose to escrow funds for your property taxes, each monthly payment will include a portion of your estimated annual tax bill. Since property taxes may change from year to year, it is possible to have a surplus or a shortage in your escrow account if there is a change in your actual taxes due. It is common for both you and your mortgage servicer to receive a tax bill from the local jurisdiction, your servicer will pay this balance from your escrow account. One bonus of escrowing is that your lender keeps track of all of the different due dates and pays them on time. Escrow accounts also benefit the mortgage lender because they have a vested interest in making sure your property taxes and insurance premiums are paid. If your tax bills don’t get paid, the tax authority could put a lien on your home which may cost the lender money if the tax authority chooses to foreclose.

What is Included in My Mortgage’s Escrow Account?

Your escrow account, which is funded by a portion of your monthly payment is used to pay for property taxes (parish and county) as well as your homeowner’s insurance premiums. Your lender will estimate your monthly escrow amount by taking the previous year’s actual property tax and insurance premium amounts, plus the required RESPA cushion, divided by 12. A surplus is created when there is an excess of funds in your escrow account. This typically occurs when there is a decrease in your property taxes or insurance premiums. A shortage occurs when the escrow account has insufficient funds to make all the necessary payments for property taxes and insurance premiums. Shortages typically occur when your property taxes or insurance premiums increase. If property taxes increase from the prior year, your lender will still pay the entire property tax or insurance premium when it is due.  Additionally, your mortgage servicer will perform an escrow analysis, at least annually, to determine if your monthly escrow payment is appropriate and sufficient to pay your tax and insurance premiums.

Escrow accounts do not cover all of the expenses related to homeownership, for example, utility bills or HOA fees. Supplemental tax bills are also not covered by escrow accounts.

What if I Have Paid off My Mortgage?

Once you have paid off your mortgage you will no longer have an escrow account managed by a mortgage servicer. If you receive a property tax bill and do not have a mortgage or do not escrow funds for your property tax with your mortgage servicer, it is your responsibility to pay the invoice.

For over 90 years homebuyers and homeowners have used the expertise of Standard Mortgage (NMLS#99412). For everything from purchasing to refinancing to escrow, and more, the team of loan officers and mortgage servicers is here to help.


Topics: Mortgages