Property Taxes

• Property taxes are the costs that homeowners pay for the maintenance of the property and surrounding area. Property taxes commonly cover the cost of schools, trash removal, road repair, street cleaning and other municipal activities. The rate is based on the value of the house. Homeowners receive property tax bills regularly from local taxing authorities.
  
  

Paying Property Taxes

• If a homeowner fails to pay property taxes the taxing authority could take action to take the home. The authority could place a lien on the property, take ownership of the house for failure to pay property taxes and then attempt to sell it to collect on the amount due. It commonly takes two or more years of delinquency to prompt this action, but it varies by county and town. If the taxing authority attempts to take over the property it creates major issues for the mortgage lender, who is the primary lienholder for the house. If a tax sale occurs, the lender would not likely receive the full amount of the mortgage debt owed. The mortgage lender will commonly learn about nonpayment from the taxing authority and contact the homeowner to request immediate payment.
  
  

Escrow

• To reduce the chances of missing property tax payments, some mortgage lenders require borrowers to set up an escrow account to make monthly payments toward property taxes and insurance. In this case the borrower must make the total property tax payment, plus principal and interest for his mortgage, directly to the lender. The lender then makes the required payment to the taxing authority.
  
  

Suggestions

• Paying property taxes is a top priority. Many taxing authorities allow you a grace period for making your payment, though you may have to pay an additional surcharge. You can also apply for an abatement, which reduces or eliminates the expense based on financial need. Call the taxing authority immediately if you need to make payment arrangements or apply for an abatement due to financial hardship.