Prepayment of Property Taxes with Escrow
Prepayment of Property Taxes with Escrow
Does anyone know what would happen if I prepaid my property taxes directly to the tax collector before year end on a property that also utilizes an escrow to collect and pay? The escrow won't pay until February, but if I pay early will the escrow administrator catch it and not double-pay? If so I imagine the escrow surplus would be refunded at the next annual escrow analysis. Or if they double pay the tax authorities I'd have to seek a refund from the local government.
I'd be curious to hear if anyone else is contemplating if this hassle is worth it. FYI in my county prepayments before year end will be allowable as deductions to my 2017 federal taxes even though they aren't due until February.
Thanks!
I'd be curious to hear if anyone else is contemplating if this hassle is worth it. FYI in my county prepayments before year end will be allowable as deductions to my 2017 federal taxes even though they aren't due until February.
Thanks!
- SmileyFace
- Posts: 9080
- Joined: Wed Feb 19, 2014 9:11 am
Re: Prepayment of Property Taxes with Escrow
I'd simply call them (bank holding your escrow) and ask.
Re: Prepayment of Property Taxes with Escrow
I no longer hold a mortgage, but when I did I contemplated this. I ended up paying off the mortgage in its entirety, so didn't follow through with it, but here is what I believe will happen, based on my thinking at the time. The mortgage company will get a bill for zero dollars, or won't get a bill at all. When they next do an escrow analysis, they will use that zero figure as the amount of your annual property taxes, and at that time you'll either get a refund of all the amounts in escrow or you will get a reduction of your monthly P+I until you use up the credit. So, as long as you do this every year it could be a way for you to virtually remove yourself from escrow for property taxes, even though your mortgage still has an escrow requirement.MuckB wrote: ↑Wed Dec 13, 2017 8:16 am Does anyone know what would happen if I prepaid my property taxes directly to the tax collector before year end on a property that also utilizes an escrow to collect and pay? The escrow won't pay until February, but if I pay early will the escrow administrator catch it and not double-pay? If so I imagine the escrow surplus would be refunded at the next annual escrow analysis. Or if they double pay the tax authorities I'd have to seek a refund from the local government.
I'd be curious to hear if anyone else is contemplating if this hassle is worth it. FYI in my county prepayments before year end will be allowable as deductions to my 2017 federal taxes even though they aren't due until February.
Thanks!
Steve
Re: Prepayment of Property Taxes with Escrow
I just did this (paid my Feb installment early). My bank said to mail them a receipt and they'd cut me a check. I will update this thread if it doesn't work out, but of course by then it will be too late for you to make a decision on this.
Re: Prepayment of Property Taxes with Escrow
Does your mortgage co. require escrow? How much equity do you have? If it doesn't, pay the bill, get the refund, and then tell them to stop escrowing. They cannot by law hold any excess, so if you pay the bill and they get a bill showing nothing is due, they have to return any overage.MuckB wrote: ↑Wed Dec 13, 2017 8:16 am Does anyone know what would happen if I prepaid my property taxes directly to the tax collector before year end on a property that also utilizes an escrow to collect and pay? The escrow won't pay until February, but if I pay early will the escrow administrator catch it and not double-pay? If so I imagine the escrow surplus would be refunded at the next annual escrow analysis. Or if they double pay the tax authorities I'd have to seek a refund from the local government.
I'd be curious to hear if anyone else is contemplating if this hassle is worth it. FYI in my county prepayments before year end will be allowable as deductions to my 2017 federal taxes even though they aren't due until February.
Thanks!
Of course, if it were me, I would call them first and tell them what you plan to do, rather than doing it first and then dealing with the ramifications.
Re: Prepayment of Property Taxes with Escrow
I plan on paying most (but not all) of my property taxes, so that a little still gets billed to the mortgage company / escrow account. Assuming they get billed for that and pay the remainder, I'll eventually get my money back through reduced escrow contributions. Not sure if this will work, but it's an idea! Good luck
Re: Prepayment of Property Taxes with Escrow
That depends - in my town, the tax collector sends one bill around July 1, with a payment due in July and and a second payment due in January. If you're paying through an escrow account, you don't get a bill. Overpayments have to refunded by a request to the tax collector. But every jurisdiction is different so it may or may not work for you.AnonJohn wrote: ↑Wed Dec 13, 2017 10:26 am I plan on paying most (but not all) of my property taxes, so that a little still gets billed to the mortgage company / escrow account. Assuming they get billed for that and pay the remainder, I'll eventually get my money back through reduced escrow contributions. Not sure if this will work, but it's an idea! Good luck
- ResearchMed
- Posts: 16761
- Joined: Fri Dec 26, 2008 10:25 pm
Re: Prepayment of Property Taxes with Escrow
We just checked with our lender.
If we pay any amount this year, for next year, we just send the lender proof of payment, and they'll send us that amount back.
RM
If we pay any amount this year, for next year, we just send the lender proof of payment, and they'll send us that amount back.
RM
This signature is a placebo. You are in the control group.
Re: Prepayment of Property Taxes with Escrow
I do get a bill, but if the city sends a wrong bill to the escrow account, and they overpay as a result, I would have to seek a refund from the tax collector (as you say). A bureaucratic hassle, if it occurs, but that risk is probably worth the potential savings. I think I can get ahead of it since I know my new assessment and can calculate and pay the taxes before the official bill is generated. (While still being in the right FY for my city).pshonore wrote: ↑Wed Dec 13, 2017 10:45 amThat depends - in my town, the tax collector sends one bill around July 1, with a payment due in July and and a second payment due in January. If you're paying through an escrow account, you don't get a bill. Overpayments have to refunded by a request to the tax collector. But every jurisdiction is different so it may or may not work for you.AnonJohn wrote: ↑Wed Dec 13, 2017 10:26 am I plan on paying most (but not all) of my property taxes, so that a little still gets billed to the mortgage company / escrow account. Assuming they get billed for that and pay the remainder, I'll eventually get my money back through reduced escrow contributions. Not sure if this will work, but it's an idea! Good luck
Re: Prepayment of Property Taxes with Escrow
I'm planning to do this as well, but am going to call my lender first to confirm the process and likely outcome. My county has indicated they accept pre-payments and if you pay before Dec 31, the bill that arrives in late January will show a due amount of $0. So, I assume, at that point, the lender doesn't disburse any funds from escrow since nothing is owed. I'm not sure if I get a "refund" check from my mortgage bank (doubtful) or they simply re-calculate what is needed for future escrow payments (more likely in my opinion). Basically, depends on your county tax rules and lender, but seems like it should work. In a similar circumstance last year, my homeowner's exemption erroneously got removed and the lender paid the full amount. When I went in to make the correction, the county refunded the amount directly to the lender who then adjusted my amount in escrow immediately.