Property tax hitting is very common in the United States. Here you will learn how it works and if it is an option for you.
What does this mean for fiduciary property taxes?
Committing your property taxes is a simple concept and a useful tool for many property owners. When you lock in your property taxes, your loan company will assess an additional amount beyond your mortgage payment each month. The amount and the fact that it should be blocked will be clearly stated on your monthly mortgage statement. These payments are placed in an escrow account where they accumulate and remain until it is time to pay your property tax bill.
Over time, you will have paid enough in small amounts to cover the taxes. When the tax invoices are mailed, your mortgage company will receive the actual invoice and pay it on your behalf. You will receive a notice of property taxes due from the taxing body. You will also be notified when your taxes have been paid.
Many mortgage lenders ask their customers to tax their money, just as they need title insurance. When setting up your mortgage payment plan with your lender, you will know whether or not you are required to obstruct your taxes. If you don't have to, you can still opt for it.
For Escrow or not Escrow?
The commitment of property taxes is popular for its simplicity and ease of use. Rather than thinking of saving money for property taxes on your own, it is already included in your mortgage payment. Paying a small portion of the taxes each month is often better for many people to come up with thousands of dollars in property taxes when they are due. An additional advantage is that your mortgage lender also takes care of paying the taxes physically. You don't have to worry about withdrawing funds from an account and sending them to the appropriate tax agency.
On the other hand, there are landlords who don't obstruct their tax payments. These people, first of all, are not required by their lender to do so or they may not have a mortgage. They also have no trouble making tax payments when the bill arrives or they prefer to save money on their own and earn interest on a private bank account.
Consider your financial habits
There is no right or wrong choice. It depends on your personality, your expenses and your payment habits. If you are not a saver, are lax in paying your bills, or know that you will not have the lump sum available for your taxes when they are owed, then you'd probably be better off put your taxes on deposit.
If you are a conscientious saver, don't have a problem having the lump sum available at tax time or prefer to manage tax payments by yourself, then you may prefer not to put your receivable property tax payments.
Your lender will be able to advise you on your options for escrow property taxes. If you have a choice, make sure you weigh the pros and cons and make sure it's the best decision for you.