Property Tax Season

It is that time of year again, property taxes in most cities are due shortly.  Lately I have taken a good number of calls about this so I figured I would address it...

First off, there are 3 ways property taxes are paid when you have a mortgage.  Some people choose to pay them in a lump sum annually.  Others choose to enroll in the TIPPS (Tax Installment Payment Plan) and pay their city directly in monthly payments.  The 3rd way is to have the lenders collect your property taxes in installments, it is added to the mortgage payment.  Lenders do not make payments to the city in monthly installments.  They collect all the money in what is called a tax account.  That way when the bill comes from the city, they make the payment to the city in a lump sum thus ensuring the taxes are paid.

If your lender is collecting your property taxes to pay the city, you must know they are not doing it for your benefit.  It is to the lenders benefit to do so because it ensures the property taxes are paid.  What most people don't know is that if the property taxes are not paid and they get behind that the city in most cases takes priority over the mortgage lender which ultimately puts their security (your house) at risk.  This is the main reason I would say that if the lender is collecting the property taxes, they will be paid.  Again is to the lenders benefit to make sure they are paid.

You will need to confirm whether or not the lender is taking property taxes.  It would have been set up at the time the mortgage was arranged and in some cases afterward.  You can confirm this in most cases by looking at a recent annual statement.  On there it may say PIT payment which means the following;
P = Principal - Principal being applied to your mortgage balance
I = Interest - Interest being applied to the mortgage
T = Taxes - Property taxes being collected on your behalf

If you are only seeing PI payments, there is a good chance you are not paying property taxes to the lender.  If you are unsure as to whether or not your property taxes are being collected by your lender I would strongly recommend you contact your lender and ask them.  Sooner than later as you don't want to incur penalties for late payment. 

If you have any questions or wish to discuss this matter in more detail please contact me.. I might be able to help you figure it out.