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Katareen
5,000 Posts!
Member since 4/10 7180 total posts
Name:
Katherine
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Taxes Upfront?
I see a ton of posts regarding paying taxes--sometimes a whole year--upfront at closing. How do I know if I will have to do this? Does it depend on the town, mortgage amount, time of year of purchase??
DH and I are seriously looking and this scares me. We'll have savings in the bank, but I don't want to blow through it paying $10K in taxes upfront.
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Posted 5/18/10 2:15 PM  |
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Prudential Douglas Elliman Real Estate
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nraboni
Uggh...
Member since 10/09 6905 total posts
Name:
Nicole
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Re: Taxes Upfront?
From what I understand it really depends on the time of year you are closing on the house as to how much taxes will have to be placed in escrow.
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| Posted 5/18/10 2:20 PM |
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alli3131
Peanut is here!!!!!!
Member since 5/09 18388 total posts
Name:
Allison
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Re: Taxes Upfront?
it will depend on your bank also
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| Posted 5/18/10 2:26 PM |
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Katareen
5,000 Posts!
Member since 4/10 7180 total posts
Name:
Katherine
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Re: Taxes Upfront?
So am I correct to assume if we're asked to put 1 year of taxes in escrow, we won't have to pay them out of pocket that year? They will be paid out of that escrow account?
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| Posted 5/18/10 2:29 PM |
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hmm8191
My loves
Member since 3/06 2908 total posts
Name:
Heather
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Re: Taxes Upfront?
Nope...of course it isn't that easy! :)
We have to put 5 months of taxes upfront at closing and then our montly mortgage payment will include our monthly taxes.
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| Posted 5/18/10 2:30 PM |
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Katareen
5,000 Posts!
Member since 4/10 7180 total posts
Name:
Katherine
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Re: Taxes Upfront?
Posted by hmm8191
Nope...of course it isn't that easy! :)
We have to put 5 months of taxes upfront at closing and then our montly mortgage payment will include our monthly taxes.
Yikes--so do you ever get that 5 months of taxes back??
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| Posted 5/18/10 2:34 PM |
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Elbee
Zanzibar
Member since 5/05 10767 total posts
Name:
Me
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Re: Taxes Upfront?
you have a choice. You can either pay your taxes out of pocket (you'll have to look at your towns schedule collections). You would pay when taxes came due. You would have to have the right amount of money at that time. Taxes are paid 4x per year I believe (2x for property tax, 2x for school tax and if you have village tax, that is another date). The same for HO insurance. You can pay that out of pocket it you want.
If you want to roll it into your monthly payment (which a lot of people do), the bank will set up an escrow account where you will pay a set amount each month (principle + interest + taxes + homeowners insurance). Your principle & interest will get paid and the rest will go into an escrow account until the taxes and/or homeowners come due. The escrow account will do all the work for you and pay everything on time with the money you have from the account..
Most banks require ,
1. UPFRONT
- any back taxes (ex: if taxes were paid 3/1 for the next 6 months and you close on 6/1, you would have to pay 3 mnths worth of taxes that the sellers already prepaid.)
- 1 full year of homeowners insurance.
2. ESCROW:
- About 4 - 6 months worth of taxes held in the account which will go toward the next tax payment date.
- 2 months or so of homeowners insurance for next year
Then Monthly,your payment will include:
- Principle + interest + PMI if you have that
AND
- Taxes + Homeowners insurance
Does that help?
Message edited 5/18/2010 2:46:05 PM.
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| Posted 5/18/10 2:44 PM |
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Katareen
5,000 Posts!
Member since 4/10 7180 total posts
Name:
Katherine
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Re: Taxes Upfront?
Posted by Elbee
you have a choice. You can either pay your taxes out of pocket (you'll have to look at your towns schedule collections). You would pay when taxes came due. You would have to have the right amount of money at that time. Taxes are paid 4x per year I believe (2x for property tax, 2x for school tax and if you have village tax, that is another date). The same for HO insurance. You can pay that out of pocket it you want.
If you want to roll it into your monthly payment (which a lot of people do), the bank will set up an escrow account where you will pay a set amount each month (principle + interest + taxes + homeowners insurance). Your principle & interest will get paid and the rest will go into an escrow account until the taxes and/or homeowners come due. The escrow account will do all the work for you and pay everything on time with the money you have from the account..
Most banks require ,
1. UPFRONT
- any back taxes (ex: if taxes were paid 3/1 for the next 6 months and you close on 6/1, you would have to pay 3 mnths worth of taxes that the sellers already prepaid.)
- 1 full year of homeowners insurance.
2. ESCROW:
- About 4 - 6 months worth of taxes held in the account which will go toward the next tax payment date.
- 2 months or so of homeowners insurance for next year
Then Monthly,your payment will include:
- Principle + interest + PMI if you have that
AND
- Taxes + Homeowners insurance
Does that help?
A HUGE amount!! Thank you!! 
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| Posted 5/18/10 2:58 PM |
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Nifheim
allo
Member since 1/09 5476 total posts
Name:
Jennifer
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Re: Taxes Upfront?
we closed in Nov and had to pay upfront. Taxes were due in December, then April.
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| Posted 5/18/10 3:21 PM |
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MrsAm
LIF Infant
Member since 2/10 81 total posts
Name:
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Re: Taxes Upfront?
Our bank is requiring 9 months of taxes in escrow (we are closing June or July). Taxes will still be rolled into our mortgage though and the 9 months stays in reserve in the escrow account so that there is always money in there.
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| Posted 5/18/10 8:20 PM |
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Spring Baby06
My two loves
Member since 5/05 3612 total posts
Name:
Jillian
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Re: Taxes Upfront?
So what actually happens to all that money in escrow?
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| Posted 5/18/10 8:27 PM |
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MrsAm
LIF Infant
Member since 2/10 81 total posts
Name:
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Re: Taxes Upfront?
It stays there and then they always have extra money for when taxes go up.
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| Posted 5/18/10 10:38 PM |
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Strawberry2468
It's summatime
Member since 3/09 4739 total posts
Name:
Christine
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Re: Taxes Upfront?
Posted by Katareen
Posted by hmm8191
Nope...of course it isn't that easy! :)
We have to put 5 months of taxes upfront at closing and then our montly mortgage payment will include our monthly taxes.
Yikes--so do you ever get that 5 months of taxes back??
Yes, if you were to sell your house, it would be worked out in the closing with your bank. You would be reimbursed any escrow they held.
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| Posted 5/19/10 8:02 AM |
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Elbee
Zanzibar
Member since 5/05 10767 total posts
Name:
Me
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Re: Taxes Upfront?
Posted by Spring Baby06
So what actually happens to all that money in escrow?
It stays in the account until things need to be paid.
You never 'get that money back' --- it's a rotating account. Money goes in from your monthly payment,money comes out as things come due (taxes & insurance). It will build then they will pay out something and you'll need to build it again. It's all worked out so that you don't have to pay $$$$$ all at once to your taxes or insurance.
When you sell, they will refund you the balance (less any requirement payments) of the account. But it's not neccesarily what you put in originally. Depending on the time of year, and what you paid out is what you will receive.
In addition, I am now in my house 14 months. I just received a escrow refund check AND my payments went down. When you close, they 'estimate' what your needs are. After 12 months, after they receive your next years insuance premiums and your actual tax statements (not the ones from the previous seller) they reevaluate and adjust the amount you pay to escrow.
The banks do not want you to have an overage in escrow. Mine allows $50 over the amount I will need for the year. Anything more gets refunded. They pretty much only want exactly what you need for the year.
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| Posted 5/19/10 8:29 AM |
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Re: Taxes Upfront?
I am a mortgage broker in Hauppauge and will be more than happy to answer any questions that you have....No strings attached. The thing with the taxes are hard to explain via email/text/post so if you would like give me a call and i will have you answering these posts for people in a week!
631-445-1781cell
631-787-8531 office
Have a great day!
Thomas Lupski
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| Posted 5/19/10 11:50 AM |
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Spring Baby06
My two loves
Member since 5/05 3612 total posts
Name:
Jillian
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Re: Taxes Upfront?
Posted by Elbee
Posted by Spring Baby06
So what actually happens to all that money in escrow?
It stays in the account until things need to be paid.
You never 'get that money back' --- it's a rotating account. Money goes in from your monthly payment,money comes out as things come due (taxes & insurance). It will build then they will pay out something and you'll need to build it again. It's all worked out so that you don't have to pay $$$$$ all at once to your taxes or insurance.
When you sell, they will refund you the balance (less any requirement payments) of the account. But it's not neccesarily what you put in originally. Depending on the time of year, and what you paid out is what you will receive.
In addition, I am now in my house 14 months. I just received a escrow refund check AND my payments went down. When you close, they 'estimate' what your needs are. After 12 months, after they receive your next years insuance premiums and your actual tax statements (not the ones from the previous seller) they reevaluate and adjust the amount you pay to escrow.
The banks do not want you to have an overage in escrow. Mine allows $50 over the amount I will need for the year. Anything more gets refunded. They pretty much only want exactly what you need for the year.
Thank you!
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| Posted 5/19/10 11:58 AM |
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