Property Taxes and Your Mortgage Escrow Account

Your mortgage servicing company (MSC) does NOT receive the Notice of Residential Appraised Value. Your MSC assumes that this year’s tax bill will be the same as last year’s tax bill. If you receive a notice indicating that your tax bill will likely increase, it’s up to YOU to adjust your budget to save for the increase. Failure to make adjustments could cause large increases in your future mortgage payments.

Example

Assume you tax bill last year was $2,400. You are paying $200 per month ($2,400 annual tax bill divided by 12 months) into your mortgage escrow account for property taxes. Now assume that you receive a notice indicating that this year’s tax bill will be 10% higher than last year’s – $2,640. When your MSC receives the $2,640 bill in the fall, they will pay it; but they may then send you a bill asking for the extra $240. If you paid attention to your notice, you will have saved this $240 and have it available to send to the MSC.

The MSC may also give you the option of making up the $240 deficit over the next twelve months by increasing your monthly mortgage payment by $20 ($240 shortage divided by 12 months). However, they will also want to make sure that you are saving $2,640 towards next year’s property tax bill, or $220 per month. That means your MSC will increase your monthly mortgage payment by $40 ($20 to cover this year’s shortage and $20 more to cover the increase in your property tax bill).

This case may not seem too extreme, but imagine if your property taxes increased $600 per year. This would result in a monthly payment increase of $100 per month. The larger the increase in taxes, the more important it is to take immediate steps to adjust your mortgage escrow account.

If you would like help analyzing your escrow account, fill out the form below. East Plano Homes will calculate how much extra you need to save to minimize the impact of increasing property taxes on your mortgage payment.

Escrow Help

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