Property Tax Facts

When you buy a house, lenders allow you the option of impounding your taxes and home owners insurance by including them in your monthly payment every month or paying them separately twice a year at specified times on your own. Either option you select, you'll still be paying the same amount in property taxes annually.

Most people don't impound their taxes and insurance because of money. When you choose to impound you pay up to 6 months of taxes up front in your down payment, depending on what time of year it is. By doing this, the money is already there when the upcoming tax bill comes to the lender. Each subsequent bill can be paid with the cumulative money that you send every month along with your mortgage payment specifically towards your impound account. When given the choice, most don't choose to part with the upfront money to set up an impound account.

The problem, especially for first time home buyers or buyers on a strict budget, is they don’t realize- and often experience financial difficulties when they find out- that in addition to their normal annual property tax bill, the first year they will be assessed a Supplemental Tax. That Supplemental Tax Bill can often total up to a few thousand dollars in addition to their normal tax bill. This can catch a borrower off guard and be enough to start that borrower on a downward spiral leading to late mortgage payments and worse. Some borrowers may never recover because they didn't know to plan ahead.

The moral of this story: Experience does not cost…it pays! Work with an experienced Realtor. Ask questions. Knowledge is Power. Know the ramification of your options so you can plan ahead. We believe that if we do a good job coaching our borrowers and following up with them, they will be in better shape to handle what's coming their way and our clients appreciate that. We want to keep our clients for life - both as their real estate and financial advisor.