Understanding Property Taxes

That dreaded time of year comes; the property tax bill arrives in the mail. Now what? Your mortgage professional can help you clarify the bill and how to move forward. These taxes are always prioritized over mortgage payments, and if you don’t pay for your taxes the city can put a charge against your property title so that it will be paid first. If this occurs, lenders become very concerned that they funds owed to them will not be paid.

Here are the three options to move forward:

• An annual payment can be arranged, which ideally comes out of a separate savings account so you always have money being set aside. This means you pay the entire bill upfront once per year.
• You can enroll in the Tax Installment Payment Program (TIPP), which allows the city to collect 1/12 of the annual amount from you on the last business day of every month. There are no fees associated with this option and at the end of the year you will still receive a summary of the annual bill for your records.
• You can have property taxes collected along with your mortgage payments. People who use this option like that there is only one bill to take care of instead of two. You should be aware though that it is possible with this option for adjustments to happen, leaving you in a shortfall position when taxes are due. This can happen because money collected with your mortgage payment is funneled into a Property Tax Savings Account. This account is used to pay your property bill regardless of the balance in the account, which can result in a surplus or shortfall. In the event of a shortfall, the money used to cover the bill needs to be reimbursed to the lender and you will be charged interest the same as your mortgage rate. At the end of the year, you will receive a Property Tax Statement to show the status of your account and advise you on changes to the tax portion calculation.

This is a lot of information and it often takes some deliberation to decide which payment option is best for you. Drop in to see your mortgage professional or come visit us at AC Lending. We’re always happy to help clarify property taxes and help you set up the best payment plan.