When you have a mortgage on house, several different factors can affect your mortgage payment. One of these factors is the amount of property taxes currently assessed on the home. In general, the higher these taxes are, the higher your monthly payment will be.

Why Do Property Taxes Affect My Payment?

In most cases, lenders require you to allow them to pay your property tax bill on your behalf. This helps to protect the lender’s interest in the property by ensuring that the local taxing authority won’t place a lien against the house for unpaid taxes. To ensure that enough money is available to pay your property tax bill each time it becomes due, your lender will collect approximately one-twelfth of the annual bill each month and keep it in an escrow account until the due date.

When Will My Payment Change?

When your annual property tax bill changes, your mortgage payment may change as well. In general, if your annual tax bill increases, your mortgage payment will increase to accommodate it. Likewise, if your annual tax bill goes down, your payment will also go down.

In most cases, changes to your mortgage payment will be made no more than once per year. These changes will occur after your lender performs an annual analysis of your escrow account to make sure the amount of money that has been collected is appropriate. If the lender finds that your escrow account it short because your tax bill was higher than expected, your monthly mortgage payment will increase to resolve the deficiency and cover the larger bill. Conversely, if your escrow account balance is higher than expected because your taxes decreased, the lender will either issue you a check or apply the excess funds to your future mortgage payments, depending on the amount of the overage.

For more questions relating to a mortgage on house, please contact Starboard Financial.