If your mortgage payment recently increased, you may assume your lender changed your interest rate, or a similar factor impacted your loan payment. But if your mortgage includes an escrow account, higher property taxes could be one of the reasons your monthly payment went up.
Your mortgage company typically collects a portion of your expected property tax bill each month and places that money into your escrow account. If your property taxes increase, your mortgage company may need to collect more each month to make sure there will be enough money available when the tax bill is due.
Check Your Appraisal Before Assuming You Have to Pay More
If your mortgage payment has increased because of higher property taxes, don’t just look at the escrow account. Look at the assessment behind the tax bill. An increase in your mortgage payment doesn’t always mean that you have to accept a higher property tax bill. Your property taxes are based in part on the value assigned to your property, so reviewing your appraisal can help determine whether the appraisal appears accurate.
Look for potential errors in your property information and consider whether your assessment is reasonable compared with similar nearby properties. If your property appears to be appraised higher than comparable properties, you may have grounds to appeal.
Appealing Your Property Taxes When You Have a Mortgage
If you have a mortgage, your property taxes are likely paid through an escrow account managed by your mortgage company. Because you may not write a separate check for your property taxes each year, it can be easy to overlook how much you’re paying, or to assume there’s nothing you can do to reduce the amount.
But homeowners who pay property taxes through their mortgage can still appeal their property tax appraisal and potentially lower their property tax burden. If an appeal results in a lower tax bill, that reduction can ultimately be reflected in the amount needed to fund your escrow account, potentially reducing your overall monthly mortgage payment.
Your Mortgage Company Doesn’t Determine Your Property Taxes
Your mortgage company may collect money for property taxes as part of your monthly payment, but the amount you owe is based on your property’s appraised value, exemptions, and the tax rates set by local taxing authorities.
This means you still have an opportunity to take action if you believe your property has been hit with overappraisal. Appealing your appraisal can potentially reduce the amount of property taxes you owe, even when those taxes are paid through escrow.
What is an Escrow Shortage?
An escrow shortage occurs when your mortgage account does not have enough money in it to cover your upcoming property taxes and insurance payments. This can happen when your property taxes increase, and the amount your mortgage company has been collecting each month is no longer enough to cover the higher bill.
When your mortgage company conducts an escrow analysis and finds a shortage, you may see your monthly payment increase. You may also be asked to pay some or all of the shortage upfront.
If higher property taxes contributed to your escrow shortage, appealing your property assessment may help. A successful appeal can reduce your property tax bill, which could lower the amount your mortgage company needs to collect for future escrow payments. However, the impact on your monthly payment depends on your individual escrow account and mortgage services.
Don’t Forget About Your Homestead Exemption
A property tax appeal isn’t the only way homeowners may be able to reduce their property tax burden. If you own and occupy your home as your primary residence, you may also qualify for a homestead exemption.
A homestead exemption can reduce the taxable value of your property, which may lower your property taxes. For example, the Texas school district homestead exemption reduces the taxable value of an eligible home by $140,000 for school district taxes. The exemption also limits annual increases in your home’s appraised value to 10%. If you haven’t already applied for a homestead exemption, it’s worth checking whether you qualify.
Keep in mind that exemptions and property tax appeals work differently. An exemption is based on eligibility, while an appeal challenges the value assigned to your property. Depending on your specific circumstances, you may benefit from both.
O’Connor Can Help You Explore Your Options
Whether you pay your property taxes directly or through your mortgage escrow account, reviewing your appraisal can help you determine whether you’re paying more than necessary.
O’Connor can analyze your property appraisal, identify potential opportunities for a reduction, and assemble the evidence needed to support an appeal. With our personalized concierge service, you have the option of an O’Connor representative visiting your property to take pictures and document the details in person.
Don’t let the fact that your taxes are included in your mortgage, or that you’ve received an escrow shortage notice, keep you from exploring your options. Find out if we can lower your property taxes today. There is no upfront cost to enroll, and you will only pay if we lower your taxes.
Frequently Asked Questions About Inheriting a House in Texas
Q: Will a successful property tax appeal lower my mortgage payment?
A: Potentially. If the appeal reduces your property tax bill, your future escrow requirements may decrease. Your mortgage servicer determines how that change affects your monthly payment.
Q: What is an escrow shortage?
A: An escrow shortage occurs when your escrow account does not have enough money to cover upcoming property tax and insurance payments.
Q: Does an escrow account mean my mortgage company handles my property tax appeal for me?
A: No. Your mortgage company typically handles collecting and paying the taxes from your escrow account. The property owner is typically responsible for pursuing an appraisal appeal.
Q: Can O’Connor help me if my property taxes are included in my mortgage payment?
A: Yes. O’Connor can review your appraisal and help determine whether an appeal may be worthwhile. The fact that your taxes are paid through escrow does not prevent you from using O’Connor property tax appeal services.
