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What is Escrow and Why Aren’t My Texas Property Taxes Included in My Mortgage?

If you are delinquent on your Texas property taxes and struggling to pay off your property tax bill in one lump sum payment, you might be looking for ways to avoid this from occurring in the future. Like many Texans, you might find it challenging when you are hit with a sizable bill at once, even when you are expecting it. For instance, the property tax bill could be higher than you anticipated and it’s not always possible to pay off your property tax bill at once. So, how do many Texans avoid this from happening? Simply by having an escrow account. 

What is Escrow? 

Escrow is a legal agreement between you and a third party, allowing the third party to hold money in an account until a particular condition has been met. In real estate, an escrow account is a holding account within your mortgage that can be used to set aside a homeowner’s funds for property taxes and homeowners’ insurance. This is the type of escrow account that occurs in the home-buying process. 

How Do Escrow Accounts Work? 

When you are purchasing a home using a lender, the lender is responsible for setting you up with an escrow account. It is then their responsibility to collect the money from you for property taxes and homeowners’ insurance on a monthly basis. The amount they collect is placed in a separate escrow account, and when the time comes, your lender will pay the property tax and insurance bills on your behalf. 

To ensure you pay the appropriate amount for your property tax and homeowners’ insurance, your lender will calculate the total annual payment and divide it by 12. The monthly amount is added to your total mortgage payment. That way, you won’t have to worry about paying a sizable bill at once. Instead, your payments are broken down monthly, making it a much more affordable and convenient option for most. Depending on the estimated tax bill on your property, your monthly payment amount may change annually.

Why Aren’t My Texas Property Taxes Included in My Mortgage? 

Property taxes will be listed on your mortgage statements if you have an escrow account for homeowners’ insurance and Texas property taxes. If your Texas taxes are not included in your mortgage, then you do not have an escrow account through your lender. Instead, when purchasing a home, you most likely chose to opt-out of having an account. This happens for a few reasons. For example, many people choose not to have an escrow account so their mortgage payments are lower, meaning they pay less each month and want to handle their finances on their own. Some people also want to keep their monthly payments the same, and when tax is included, this can very easily fluctuate their monthly payments. Others choose to have their own separate account for the purpose of investing. If your money is in an escrow account it is not earning interest. Instead, some Texans would rather use that extra money for short-term investments. 

No matter your situation, if you are currently behind on your Texas property tax bill, Johnson & Starr can help. We take pride in being a trusted Texas property tax lender that can save your home or business. Contact us today, and one of our helpful team members will walk you through any questions.