Ryan’s Mortgage Blog:
For today’s Blog I wanted to briefly go over property taxes and how you they affect you when you buy a home. Taxes can be confusing and I am not a pro by any means but I do know a couple things you need to be aware. When property is sold the taxes adjust to the current value (sale price). Since taxes are only collected twice a year, a majority of the time the property changes hands in the middle of a tax cycle. The sellers are responsible for the months of the cycle they owned the home and the new owners take over from there paying their new tax amount. If you have impounds with your mortgage (lender collects your taxes monthly and pays them for you), you will start paying your new tax payments immediately. Depending on when the taxes are due some lenders require you to pay for the full 6 months in advance at the time of closing, which is a different story. Sometimes they over change you at escrow and you actually pay for months that the prior owners have already paid, so you will get a refund (You can keep this…it is different from the refund I am about to tell you about).
The problem occurs when the county doesn’t get wind that the property changed hands until six months down the road (it takes them anywhere from 3 weeks to a year to get caught up). So what happens is for the first six months in your new home your mortgage company pays the county your new rates, but the county has not updated their system, and is only charging you for the old rates the prior owner was paying. So what happens is they send a letter out saying you have over paid your taxes and here is a refund check for the difference (which can be thousands of dollars). Well, three months later the county sends you a letter (supplemental tax bill) saying you owe “x” amount of dollars because we realized your house sold nine months ago and you’re your taxes went up and you owe us for the difference (which they sent you prior in the form of a refund). Now you as the owner need to pay this supplemental tax bill, YOUR MORTGAGE COMPANY DOES NOT PAY SUPPLEMENTAL TAX BILLS. So I recommend when you get this first refund, which is only because the records aren’t all caught up, put it in the bank so when you get the supplemental tax bill you have the money to pay for it. I hope this helps!
Please contact me with any questions or comments at RBaker@PeregrineLending.com or 805-540-0866.
Ryan’s Mortgage Blog: