Are Property Taxes Included in Mortgage Payments in Texas? 

Property taxes in Texas are often higher than in many other states, and homeowners need to know whether those taxes are paid separately or included in their monthly mortgage payment. Texas homeowners should include property taxes as an important budget item.  

Below, we explain how property taxes are typically handled with mortgage payments, what an escrow account does, and what happens if you pay off your mortgage or don’t have an escrow. 

Do Mortgage Payments in Texas Include Property Taxes? 

In many cases, property taxes are included in your monthly mortgage payment through an escrow account with your lender. Lenders calculate an estimated annual tax amount, divide it by 12, and include that portion in your monthly mortgage bill. This way, you’re essentially “pre-paying” your property taxes each month instead of paying a lump sum once a year. 

However, property taxes and your mortgage loan are still two distinct financial obligations. The lender collects estimated taxes and places them into an escrow account, a separate holding fund, and then pays them to the county when the tax bill is due. 

What Happens if the Tax Estimate Is Wrong? 

Estimates aren’t always perfect. If your property taxes increase unexpectedly or the lender miscalculates, you may end up with an escrow shortage, meaning there isn’t enough money in the escrow account to cover the bill. In that case, the lender may pay the difference and then give you options: 

• Repay the shortage in one lump sum 
• Pay it back over the next year with slightly higher monthly mortgage payments 

If your escrow account has more money than needed, your lender may refund the excess if it exceeds a certain threshold. Read our blog to learn more about how escrow accounts work.

Is It Required to Pay Property Taxes Through Your Mortgage? 

Not always. Whether property taxes are included in your mortgage payment depends on: 

• The type of loan you have 
• Your down payment amount

For example: 

• FHA, VA, or USDA loans typically require an escrow account for taxes and insurance 
• Conventional loans with less than 20% down often require escrow 
• Some conventional loans with higher down payments may let you opt out of escrow and pay taxes directly. 

Lenders prefer escrow because it reduces the chance that taxes go unpaid. If taxes become delinquent, it can lead to liens or even foreclosure, a risk the lender wants to avoid. 

What Happens After You Pay Off Your Mortgage? 

Once your mortgage is paid off in full, you are no longer required to pay property taxes through escrow. At that point:

• Your lender is no longer involved 
• You must pay your property taxes directly to the county tax authority 
• You will receive tax notices from the county, not your mortgage servicer 

Most counties provide online payment portals or mail-in options for tax payment once escrow is no longer used. 

What If You Don’t Have an Escrow Account and Can’t Pay Your Taxes? 

If you’re responsible for paying property taxes on your own, because you opted out of escrow or your mortgage doesn’t require it, and you fall behind, you may face penalties, interest, and even legal actions. In such cases, homeowners sometimes choose professional assistance to address delinquent taxes.

Johnson & Starr, for example, provides property tax loans that pay off overdue taxes and allow you to repay on a manageable schedule. This can be a helpful option for homeowners struggling with a large lump sum bill. For more information or to discuss your options, contact Johnson & Starr today.