While many people believe that they know the basics about property taxes, it is a complex topic that can be misunderstood easily. Once intertwined with the mortgage process, things can seem even more complicated. Luckily for your benefit, I have provided some basic things to know about property taxes below so that you can stay in the loop when it comes to your personal property taxes.
- There are 3 ways to pay property taxes:
First, you can pay your property taxes to your mortgage company with your mortgage payments, and they will pass on the funds to the municipality. Many people like this option as it lumps together the withdrawals from your account, and you will still receive a full property tax bill indicating that the payment has been made by the mortgage company. Keep in mind that sometimes this service costs a small fee.
Second, you can use the Tax Installment Program Payment System (TIPPS). This program is free in most municipalities, and it usually entails a withdrawal of 1/12 of your tax amount at the end of each month.
Third, you can make your property tax payment once a year in a lump sum directly to the municipality. Although some people prefer this option, it is not for everyone.
- Tax adjustments may happen:
Occasionally when you purchase a new home and the seller has pre-paid their yearly taxes, you may have to reimburse them for these funds. This is the reason for keeping an extra 1.5% of the purchase price for closing costs. If this is necessary for you, your lawyer will inform you.
- You must pay your property taxes:
Many people understand the importance of paying their taxes, but they do not necessarily know what will happen if they don’t. If left for long enough, you could incur extra fees, a tax lien, or even have your property seized. Mortgage lenders have a legal right to make sure that you are paying your property taxes, and if you have a tax lien it can be difficult to get a mortgage in the future.
- You may not always get to choose which method you use:
Sometimes because of risks associated with mortgage lending, some banks will not allow for a yearly payment option and will require you to use one of the first two payment options. Be prepared that you may not always get to choose from all three options.
If you have questions regarding property taxes or the link between mortgages and those taxes, contact me today.
