Financing in 19335>Question Details

Jessica, Home Buyer in 19330

Does property tax always get bundled into a mortgage?

Asked by Jessica, 19330 Wed Nov 9, 2011

Does property taxes always get bundled into mortgage? Can you opt out of having it as your mortgage payment, and pay it separate? Are you basically paying interest on the property tax by having it bundled into mortgage? Also, does this also go with home owner insurance?

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If you have more than 20% down on your property you do not have to escrow your taxes. You can choose to pay the taxes yoursellf when they are due.

Linda Burgwin
Realtor ® ABR / EPRO/Relocation Specialist
Long and Foster Real Estate
92 Lancaster Ave. Devon,PA 19333
Office: 610-225-7400
Fax: 610-225-7401
Cell: 484-716-0163
1 vote Thank Flag Link Wed Nov 9, 2011
Any decent bank makes sure they have a tax escrow and an insurance escrow in place it protects them from losing the property first from you not paying taxes, since taxes take first place in any lien situation and then of course they want protection from property lose due to acts of God other natural disaster.
0 votes Thank Flag Link Wed Nov 9, 2011
Not always, but most times yes. It depends on lender and on type of loan.
0 votes Thank Flag Link Wed Nov 9, 2011
On FHA and VA loans it is required. Otherwise, I am not sure what the rules are in your area.
0 votes Thank Flag Link Wed Nov 9, 2011

Banks like to bundle it so they know it gets paid because tax liens go ahead of mortgage liens. By having you pay into an escrow account they have the funds to pay the taxes when they are due. Similarly, they like to have the insurance so they know the property is covered should something happen.

Oncve you have established some history with the mortgage company they may allow you to pay the taxes yourself, some charge a fee for this others don't.
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0 votes Thank Flag Link Wed Nov 9, 2011

Most lenders prefer to pay the taxes annually and collect from you 1/12th every month. Typically, if you put 20% or more down, you may be able to choose not to escrow, but there is a fee you must pay to the lender to do so. This is the same for property insurance. These are good questions for your lender as it depends on their policies. You are not paying interest on the escrow monies they collect, they hold the money until the payments are due.

I hope this is helpful. Have a great day!

Mary Robins
Keller Williams Realty
610-220-7145 direct
0 votes Thank Flag Link Wed Nov 9, 2011
If you are buying a home it depends on the type of loan and how much down payment you are making. On an FHA loan both taxes and insurance must be included on single family homes. On conventional loans if you put down 20% they are not required but there is a .25% hit to the yield or closing cost. The matrix assumes taxes and insurance are going to be escrowed and that is calculated in the interest rate, if you remove that it changes the rate.

No, you are not paying interest nor are you receiving interest on the escrow account. Hope this is helpful,
0 votes Thank Flag Link Wed Nov 9, 2011
No, many taxes and insurance bills are paid directly by the mortgagee holder - especially if the lender is a small institution.
0 votes Thank Flag Link Wed Nov 9, 2011
They do not always get bundled into you payment. Some lenders will allow you the option to pay the taxes on your own. They may charge you a fee to do so. You are not paying interest on it, but they are not giving you any interest on the money they are holding in your escrow account. Same situation with homeowner's insurance. Call me if I can help, thanks.
0 votes Thank Flag Link Wed Nov 9, 2011
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