As a homeowner, there are a few ways that you may pay your property taxes. You may pay them directly to your tax assessor, or they may be included in your monthly mortgage payment through an escrow account. Oftentimes, homeowners are obligated to pay through an escrow account.
If your lender establishes an escrow impound account for your loan, your property taxes will be included in your monthly mortgage payment. In an escrow account, your property taxes and annual homeowners insurance premiums are divided evenly over the year and lumped into your monthly mortgage payment. Your lender is then responsible for making payments to your county tax assessor and homeowners insurance provider on your behalf. If you don't have an escrow account, you'll receive a property tax assessment notice once or twice a year from your county tax assessor.
Escrow Account Requirements
It's common for a lender to require an escrow account for a loan. If your mortgage loan is insured by the Federal Housing Administration, you'll be required to set up an escrow account. Your lender also may require you to set up an escrow account if you have a loan through the Veterans Administration or if your loan is especially large. In other situations, the lender can decide whether or not to require an escrow account.
Even if an escrow account isn't required, many homeowners elect to use an escrow account because it breaks down large annual property tax and insurance bills into more manageable payments. Bankrate.com points out that homeowners who opt for an escrow account are sometimes offered a lower interest rate.
Calculating Your Escrow Payment
To calculate your monthly escrow payment, divide your annual property tax and homeowners insurance bill into 12 parts and add it to your monthly mortgage obligation. For example, say that your annual property tax bill is $1,000, your annual homeowners insurance premiums are $800 and your monthly mortgage is $2,000. The sum of the property tax bill and the insurance premiums -- $1,800 -- divided by 12 is $150. That means that your monthly payment is $2,150 when the mortgage and escrow amounts are combined.