Are Property Taxes Included in Your Mortgage?

Property taxes are not included in your mortgage, but may be included in your mortgage payment. When lenders collect money for property taxes simultaneously with your monthly mortgage payment, it can appear that property taxes are included in your mortgage, but they’re actually part of what is called an escrow payment. Your lender will hold property tax in an escrow account until the bill is due, and then pay the tax on your behalf using the funds they’ve collected over the year.

Not all homeowners are required to make property tax payments through their mortgage servicer. Some lenders may allow you to waive escrow for a fee. Even if an escrow account is not required, some homeowners may still choose to have their lender collect property taxes and store them in escrow, rather than make a large lump sum tax payment once or twice a year. 

What are property taxes?

Property taxes are funds your local government typically collects periodically for owning real estate property. These fees are usually used to fund public service projects within the community, like new roads, parks, schools, hospitals, and fire departments. The cost of property taxes is based on the assessed value of your home and the surrounding properties, which are re-assessed every one to five years.

You can use our Property Tax Calculator to estimate your property tax costs based on the location and value of the home.

When are property taxes included in a mortgage?

Property taxes must be included in your mortgage payment when you have a government-backed loan, such as an FHA, VA, or USDA loan, or you make less than a 20% down payment on a conventional loan.

When your lender includes property taxes as part of your monthly mortgage payment, they’ll usually also include money to cover homeowners insurance and mortgage insurance premiums. By including these costs in your mortgage payment, lenders can ensure that these additional homeownership costs are paid on time, reducing the risk of loan default from missed payments. 

How are property taxes paid if included in a mortgage?

When property taxes are included in your mortgage payment, your lender will make the payment on your behalf using the funds from your escrow account. Tax statements are sent directly to your lender, who splits the amount owed into monthly payments. Those payments are collected as part of your mortgage payment and stored in your escrow account until the property tax bill is due.

Example of including property taxes in your mortgage

Let’s say you owe $2,400 in property taxes for the year. Your lender will divide your total property tax amount by 12, bringing your $2,400 bill to 12 monthly payments of $200. They’ll add $200 to your monthly mortgage costs, so you won’t have to worry about making a separate, large payment in addition to your mortgage. At the end of each year, your lender will provide a statement showing you the amount of funds received and paid, and whether your remaining balance is short or needs additional funds to keep your account current for the next year.

Can I get an escrow waiver for my mortgage?

An escrow waiver allows you to pay your property taxes and homeowners insurance separately from your mortgage. Qualifying for an escrow waiver on a conventional loan depends on the lender’s rules, state laws, and your ability to meet the following requirements:

• A 20% down payment or 20% equity if refinancing
• A loan-to-value ratio (LTV) of less than 80%
• No late payments within the last two years
• A credit score of 640 or higher, depending on the lender
• No history of defaults involving an escrow waiver
• Adequate cash reserves after closing
• Pay an escrow waiver fee

FHA loans and USDA loans don’t offer escrow waivers. The U.S. Department of Veterans Affairs also doesn't require escrow accounts for VA loans, but VA lenders typically do. The requirements for a VA escrow waiver are similar to conventional loans, in addition to:

• The VA loan must be a minimum of one year old
• All payments must be made on time and in full during that first year
• No property taxes or homeowners insurance payments can be due within 30 days of the waiver request

How do I pay my property taxes if they’re not included in my mortgage?

You must pay your local tax office directly if you don’t pay your property taxes as part of your monthly mortgage payment. You’ll receive the property tax bill in the mail, which outlines how much you owe, your payment options, and the payment directions. Even if you use an escrow, you will receive a statement or bill, so know how your taxes and monthly mortgage payment will change.

Your payment options typically include:

• Check or money order (through the mail)
• Online using an electronic check (eCheck), debit, or credit card
• By phone using a credit or debit card

While property taxes are typically paid annually or bi-annually, you can usually speak to your county treasurer’s office about paying your taxes monthly or quarterly. Some municipalities also offer discounts for early payments.   

What happens to my property taxes when I pay off my mortgage?

If your property taxes are included in your mortgage payments and you repay the loan in full, you’ll still have to continue paying property taxes on your own. Once you repay your mortgage, contact your county tax authority to arrange for them to send the tax invoice directly to you instead of your mortgage servicer. From there, you can decide whether to make monthly, annual, bi-annual, or quarterly payments.

Understanding if your mortgage will include property taxes begins with understanding your finances and home loan options. Start by pre-qualifying for a mortgage with us at Zillow Home Loans.* The process takes as little as three minutes, with no impacts on your credit.

*An equal housing lender. NMLS #10287