How do property taxes work?
Whether you’re planning on purchasing, refinancing or selling your property it’s very important to understand how property taxes are structured.
How are property tax payments divided up?
Property taxes are essentially divided up into two payments during the course a year with the first payment due on November 1st (considered late if not paid by December 10th) and the second payment due on February 1st (considered late if not paid by April 10th). The property tax year goes from April of one year to April of the next year. Property taxes are paid in arrears, meaning that your first property tax payment in November, covers the six month period before that payment, and the second installment payment covers the six month period before that.
Who pays for property taxes? The Seller or Buyer?
When purchasing or selling a property, these property taxes are typically prorated between the buyer and seller depending upon the time of year that the sale closes. If, for example, the seller has already paid all of the property tax installment payments for the property tax period, then there’s a good chance that you as the buyer will have to pay property taxes from the date the transaction closes to the end of the next property tax period.
When applying for a home loan, you as the borrower will sometimes be given the choice of whether to pay your property taxes through an escrow account or separately. If you choose, or are required, to pay your property taxes through an escrow account, this means that payments of property taxes will be included in your monthly mortgage payment. If you pay them separately, you’ll have to make sure that you pay them on time, so that you can avoid having any tax lien being filed against your property.