Should You Pay Your Property Taxes with Your Mortgage?

If you’re a first-time homebuyer, chances are, your lender will require you to pay property taxes as part of your mortgage payments. Still, many people continue to pay them like this throughout their time as mortgage holders. Once you’re no longer required to pay taxes with your mortgage, however, it becomes a question of how you feel more comfortable ensuring your property taxes are paid on time.

Paying your property taxes with your mortgage offers both advantages and disadvantages, making it important to weigh your options before deciding if it’s the right method for you.

Pros

1. Convenience. Combining your property tax payments with your mortgage means you don’t have to worry about separate bills or deadlines. Your lender handles the payments, ensuring they are made on time, which can reduce the stress of managing multiple financial obligations.
2. Budgeting. By spreading out the tax payment over 12 months, it’s easier to manage, avoiding the shock of a large lump-sum payment when taxes are due. This predictable monthly amount can make it easier to manage your finances.
3. Avoiding Penalties. Since the lender is responsible for making the payments, homeowners can avoid the risk of late payments and the associated penalties or interest charges. This is particularly beneficial for those who may forget, or struggle, to pay a large bill once or twice a year.

Cons

1. Less Control. A significant downside is the loss of control over your money. Homeowners must trust that the lender will make the payments on time. If there’s a mistake, it could lead to complications.
2. Potential Overpayments. Lenders often estimate taxes and collect a little extra to ensure there’s enough in the account to cover any increases. This means you could be overpaying each month, with the lender holding onto your money until it’s needed.
3. Fees. Some lenders charge a service fee for handling your property taxes. Over time, these fees can add up, making this method more expensive than paying taxes directly.

While paying property taxes through your mortgage payments offers convenience and budgeting ease, it comes at the cost of reduced control and potential extra fees. It really comes down to personal preference when selecting how to pay your property taxes.

Have questions about property taxes or your mortgage in general? Answers are a call or email away!