Property Tax Surprises

There are two ways property taxes can surprise you on your closing date.

1) The seller may have already paid property taxes for the full year, and as such is entitled to a credit for their unused portion. We call these prepaid property taxes.

millennials struggle with homeownershipSuppose your annual taxes are $7,200 and your seller prepaid the full year. With a closing date of August 13, you need to give back 140 days worth of taxes. That’s just over $2,760.

2) The other way property taxes can surprise you is when your mortgage lender is going to take a fixed amount for property taxes from your bank account along with every mortgage payment.

This means they are going to accumulate the taxes for you, and remit from time to time to your municipality.

They always start things off by collecting a few months’ worth upfront. It varies by lender and also by where we are in the calendar year. Don’t be surprised if it is three to six months’ worth of taxes. You can see how this adds up if your property taxes are $7,200 per year.