Property Taxes Archives – Mike Pfefferman

25

Aug

Mortgage Tips

What Happens to Your Mortgage When Property Taxes Are Reassessed?

A fixed-rate mortgage provides predictability because your interest rate and principal-and-interest payment remain consistent. However, that does not necessarily mean your total monthly housing payment will stay exactly the same. Property taxes can change over time, and when they do, homeowners who pay taxes through an escrow account may see their monthly mortgage payment change as well.

Why Property Taxes Are Reassessed
Local governments use property assessments to help determine how much homeowners owe in property taxes. Depending on where you live, reassessments may occur periodically, after a property is sold, following major improvements, or because of changes in local property values.
The rules vary considerably by location, which is why buyers should understand how assessments work in the area where they are purchasing.

What Happens When Taxes Increase
If your lender or loan servicer collects property taxes through escrow, a tax increase means more money will need to be collected each month to cover the higher annual bill.
Your servicer generally performs an escrow analysis to determine whether the amount currently being collected is sufficient. If it is not, your escrow portion may increase.

An Escrow Shortage Can Also Affect Your Payment
Sometimes a tax increase creates an escrow shortage because the account did not contain enough money to cover the new bill. Depending on your loan and servicer, you may have options for addressing that shortage, such as paying it separately or spreading the amount over future payments. Your regular escrow contribution may also be adjusted to reflect the new tax amount.

Plan for Changes Before You Buy
When evaluating affordability, do not assume the seller’s current property tax bill will necessarily become your future tax bill. Ask your real estate and mortgage professionals about property tax considerations in your area and include potential changes in your homeownership budget.

Review Your Escrow Statements
Your annual escrow analysis provides valuable information about taxes, insurance, account balances, and changes to your monthly payment. Reviewing it carefully can help you understand why an adjustment occurred.

A fixed interest rate can provide valuable stability, but property taxes remain a separate part of your housing expenses. Understanding how reassessments work can help you budget more accurately and avoid being caught off guard by a future payment change.

07

Aug

By Mike Pfefferman

Mortgage Tips

What Every Homeowner Should Know About Escrow

If you have recently purchased a home, you have probably heard the term “escrow” several times throughout the mortgage process. While many homeowners understand that escrow is part of their monthly payment, they are often unsure how it actually works. Understanding your escrow account can help you better manage your mortgage, avoid surprises, and feel more confident about your homeownership expenses.

What Is an Escrow Account?

An escrow account is a separate account managed by your mortgage servicer. Instead of paying your property taxes and homeowners insurance directly, a portion of your monthly mortgage payment is deposited into this account. When these bills become due, your loan servicer pays them on your behalf using the funds that have accumulated in escrow.

Why Escrow Is Beneficial

Escrow helps homeowners spread large annual expenses over twelve monthly payments instead of paying them all at once. This makes budgeting easier and helps ensure important bills such as property taxes and homeowners insurance are paid on time. For many homeowners, escrow provides added convenience and peace of mind.

Why Your Escrow Payment Can Change

Your lender reviews your escrow account each year through an escrow analysis. If property taxes or homeowners insurance premiums increase, your monthly escrow payment may also increase to cover those additional costs. If taxes or insurance decrease, your monthly payment could go down. These adjustments are based on actual expenses, not changes to your mortgage interest rate.

Review Your Annual Escrow Statement

Each year, your mortgage servicer provides an escrow statement showing how much was collected, what was paid, and whether your account has a shortage or surplus. Taking a few minutes to review this statement can help you understand changes to your monthly payment and prepare for future expenses.

Escrow is designed to make homeownership simpler by helping you plan for important annual expenses. Understanding how your escrow account works allows you to budget more effectively and feel confident knowing your taxes and insurance are being managed throughout the year.

06

Jun

By Mike Pfefferman

Mortgage

How Property Taxes Impact Your Mortgage Payment

When buying a home, most people focus on the home price, interest rate, and monthly payment. But there’s another major factor that can significantly affect your mortgage: property taxes. These taxes can make your mortgage payment higher than expected and understanding how they work is key to managing your budget effectively.

Below, I will break down how property taxes influence your mortgage and what you can do to plan ahead.

What Are Property Taxes?
Property taxes are local taxes assessed on real estate by your city or county government. These funds help pay for public services like schools, police and fire departments, roads, and parks. The amount you owe each year is based on the assessed value of your home and the tax rate in your area.

For example, if your home is valued at $300,000 and your local property tax rate is 1.2%, you will owe $3,600 in property taxes annually.

How Property Taxes Affect Your Mortgage Payment
Most homeowners pay their property taxes through an escrow account set up by their mortgage lender. Here is how it works:

Your lender estimates your annual property tax bill, divides it by 12, and adds that amount to your monthly mortgage payment. The lender collects this money each month and pays the tax bill on your behalf when it comes due.

So, if your base mortgage payment (principal + interest) is $1,500 and your estimated monthly property tax is $300, your total mortgage payment becomes $1,800.

This means your monthly payment can fluctuate, even if your loan amount and interest rate stay the same.

When Property Taxes Go Up
Your local government reassesses property values regularly. If your home’s value increases or the tax rate changes, your property taxes—and your mortgage payment—can go up, too.

Each year, your lender performs an escrow analysis to check if you’ve paid enough to cover your tax and insurance bills. If taxes have increased, you may receive a notice of escrow shortage and a higher monthly payment to make up the difference.

This surprise can catch homeowners off guard, especially if the increase is significant.

Tips to Stay Ahead

Know Your Local Rates:
Before buying a home, research the area’s property tax rate. A slightly more expensive home in a lower-tax area may have a lower monthly cost than a cheaper home with high taxes.
Watch for Reassessments:
Stay informed about property assessments in your area. If you think your home’s assessed value is too high, you may be able to appeal the assessment.
Plan for Increases:
Property values often rise, especially in desirable neighborhoods. Build some cushion into your budget for potential increases in taxes.
Review Your Escrow Statement:
Lenders send escrow statements each year. Review them carefully and ask your lender if anything looks off.

Understanding how property taxes affect your mortgage helps you plan smarter, avoid surprises, and stay in control of your housing costs. It’s not just about what you borrow, it’s also about what your community collects.