There could be thousands of dollars sitting in your tax account.
Some lenders put the money you pay for your taxes with your monthly mortgage payment in an interest-bearing tax account but others don't. Does your lender need to pay your annual property tax on your behalf?
In addition to your mortgage payments, you also have to pay the balance of your tax bill. But, although having your lender pay property taxes for you seems convenient, it can cost you extra money.
Firstly, some lenders charge a yearly tax administration fee for paying your taxes for you. This can cost up to $450. Secondly, because property tax rates rise between 3 and 5 percent each year, your lender will collect an "inflated" payment to accumulate a tax account surplus which acts as a buffer. This money is held in a tax or escrow account.
When taxes rise, instead of renegotiating your monthly mortgage and tax payment, your lender will dip into the tax account and take out the difference to pay your taxes.
Please note, over time, extra money accumulates in this tax account. Sometimes, even thousands of dollars are sitting in there and they won't get credited back to you until you pay off your mortgage.
Alternatively, if you opt to pay your own taxes, the balance in the tax account will be credited to you since the lender is no longer paying your taxes on your behalf.
To maintain the convenience of taxes automatically getting paid and save money, why not set up a payment plan directly with your Town or Municipality? That way you don't pay more an admin fee to your lender and you don't pay more than you have!
Have mortgage questions? Don't hesitate to call (647) 773-4849. I can help you make sound financial decisions in real estate.
Sarah A. Colucci
Sr. Mortgage Agent, Lic. M14000929
Mortgage Edge, Broker 10680
Email in confidence: firstname.lastname@example.org
By: Sarah Colucci
411 Queen St.
15 Wertheim Court, Suite 210
Richmond Hill, Ontario
Sarah A. Colucci, Mortgage Agent Lic. M14000929
Mortgage Edge, FSCO Lic. 10680