How Do Property Tax Appeals Affect Your Escrow Account?
Your property tax bill is the biggest determinant of how much you pay into your escrow account every month, and a successful property tax appeal can impact how much you pay every month. This article explains how a successful appeal can impact your escrow payments.
First, some background on escrow accounts. An escrow account’s primary purpose is to provide additional assurance to a lender that the property underlying a mortgage is protected. By requiring homeowners to pay into an escrow account, a lender can be confident that property tax bills and insurance premium are paid on time.
The amount paid into your escrow account for property taxes can vary, but there are usually three elements that are important to keep track of.
Minimum balance: This is the minimum amount required to be in the account, and is usually equal to 1/6th of your total yearly property tax bill — or two months worth of payments. If you go under this amount, your payments will increase until you are above the buffer.
Maximum balance: This is the maximum amount your lender is allowed to require in the account. This number is often set by state statute, and if your account balance goes over, you should receive a check from your escrow provider.
Monthly payment: This is the monthly payment required, which is roughly 1/12th of the total cost of your annual property tax bill.
Your escrow account servicer is required to monitor your property tax liability and adjust the required payments if your property tax bill changes. If you get a successful property tax reduction, you can expect your required payments to change the next time your tax jurisdiction uses your assessment to calculate your tax bill. Because bills are not always released immediately after a reassessment, it can sometimes take several months for the monthly payment to adjust.
If it looks like your escrow account servicer has not adjusted your monthly payments, you should contact them and let them know what the current tax bill is.