Written by Anza Goodbar (last updated November 22, 2011)
When purchasing a home, considering the amount for insurance and taxes is a must when calculating what you can afford. Most lenders will use an estimated amount when formulating a monthly payment to include PITI (principle, interest, taxes and insurance).
The easiest way to save for property taxes is to escrow the amount into your bank note. Most lending institutions will automatically do this for you when setting up your loan. Some states pay taxes annually and some bi-annually. Lending institutions will set up payments according to your local municipality's payment schedule. If an escrow account is established with the initiation of a loan, payments will be made automatically by your lender. If an escrow account is not set up, it cannot be established at a later date without obtaining a new loan through a refinance. Your escrow amount may change according to your actual property taxes on an annual basis.
If you choose to pay property taxes on your own, it is wise to set up a savings account and put in monthly contributions. You can do this through a monthly transfer from your checking account or through a payroll deduction. Property taxes are available through the country assessor's office. Once you have obtained the annual amount due, divide the amount equally by twelve months in order to determine your monthly or bi-monthly savings amount.
The County Assessor's office will send out a tax bill according to your local area's schedule. If you escrow the amount into your monthly house payment, your lender will simply pay the bill on your behalf. File the bill with your loan paperwork and forget about it. If you are paying taxes on your own, it is important to pay the bill promptly. Paying your tax bill late will incur penalties and interest.
If the tax bill goes unpaid, the state can file a tax lien. If the delinquent taxes are not brought up to date according to tax laws in your state, the lien may go to auction and the property could be foreclosed upon for unpaid taxes.
As you can see, it is important to keep your property taxes paid on time and current. If saving is not your forte, the easiest way to insure there are no problems, set up an escrow account when you purchase or refinance your home. It relieves undue stress in coming up with a large amount of money when the taxes are due. If your home is paid off, it will be necessary to set aside a portion of the annual taxes each month in order to pay the bill on time.
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