It’s not unusual for bills to provoke some stress or anxiety, but….confusion, too? Bill-paying should be, at the very least, a straightforward process.
Unfortunately, paying property taxes is one of those confusing processes. Many first-time homeowners are unsure how to pay property tax, which only adds to the financial stress.
The root of the problem is that people with mortgages pay differently than those who own their homes outright.
It’s important to know your individual situation because you could incur penalties or fees for paying property taxes late or incorrectly. Below, we’ll break down the payment process so you can end the headaches once and for all—and never worry about how to pay property taxes again!
How Do You Pay Your Property Taxes?
As mentioned above, this depends on whether you have a mortgage or own your home outright. The sections below outline the processes for both scenarios.
Paying Property Taxes Through a Mortgage
Homeowners with a mortgage usually roll their property taxes into their monthly mortgage payments. The financial institution handles the payment for you.
Here’s how it works: When you purchase a new home, your mortgage lender estimates the amount of property tax due each year. They divide that amount by 12 and add it to your monthly mortgage payment.
Why do they do mortgage companies charge monthly? Rather than asking you for a large amount of money once or twice per year, this method ensures property tax payments are made in full and on time.
Your lender keeps these additional funds in an escrow account. You can often see the amount being set aside by looking at the “escrow” line item on your monthly mortgage statement or bill.
Note, that an escrow account may also hold funds for homeowners insurance and mortgage insurance, too.
When it comes time to pay the property tax, your lender receives the bill and pays it on your behalf. If the amount is higher or lower than expected, the mortgage company will either ask you for the additional amount or reimburse you.
What you need to do: Make sure your payment is accurate. To do this, ask your local tax office for the exact property tax amount and check it against the amount listed in your annual escrow statement.
Did you receive a property tax bill in error?
Mortgage holders don’t usually receive property tax bills directly. If you receive a bill, it could be due to a simple clerical error or a change in your loan servicing company (the third party who collects and disburses the account funds).
Call your local tax office first to determine if they received a tax payment. If not, contact your lender and ensure they are taking steps to resolve the issue.
Paying as a Homeowner Without a Mortgage
If you own your home outright, you are responsible for paying taxes directly to your local tax authority.
Here’s how it works: You’ll receive a property tax bill in the mail with payment instructions. Simply follow the instructions to make payment. You should receive the bill several months before the due date.
Your jurisdiction may offer the option to pay it all at once or in installments, such as biannually or quarterly. Sometimes discounts are offered for early payment. Note that you may not receive an additional bill for every installment, so it’s wise to set a reminder for when payments are due.
Common online payment options:
- Credit or debit card (often an associated fee like 3%)
- Electronic check (eCheck)
- Electronic funds transfer (EFT) or ACH wiring
Other payment options:
- Personal or cashier’s check (in person or by mail)
- Money order
- Telephone via a credit or debit card
However you decide to pay, it’s essential to budget for property taxes, have the necessary funds to pay them, and research how your local tax office accepts payment.
We also recommend that you ensure you’ve applied for any qualifying exemptions and always appeal your property taxes, which are often overvalued.
How to Pay Property Taxes in Different States
Moving could pose another challenge related to property taxes because each state has its own processes and deadlines for property tax payments.
Here’s a sampling of how it works in some states:
No matter where you live, these tips will ensure the process goes smoothly:
Know your deadlines. Property tax deadlines vary by location, so be aware of the specific due dates in your area. You’re responsible for payment even if the bill gets lost in the mail, so track it down if it hasn’t arrived at least a couple of weeks before the due date.
Set up payment reminders. Many local tax offices offer electronic reminders to notify you of upcoming tax deadlines. If available, sign up to avoid missing payments.
Find out about payment options. If you cannot pay your property taxes in full, check if your local tax authority accepts partial payments or offers hardship programs.
If you’re responsible for paying your own bill, try to mimic the mortgage payment model by setting aside money in your bank account every month explicitly designated for property taxes. This ensures you’ll have the funds available when the bill comes due.
What Happens If You Don’t Pay Your Property Taxes on Time?
When you miss a payment, your municipality may charge interest or late fees—or both. The end result, of course, is that your bill increases! If you’ve simply missed the deadline, pay the bill as soon as possible to avoid penalties.
If you’re struggling to pay your property tax bill, however, the problem could snowball. Your local government will eventually put a lien on your home if the nonpayment continues—a notice that indicates you have unpaid debt. Eventually, they may even force a sale of your home in an effort to collect the back taxes.
Don’t ignore a property tax bill you can’t afford to pay! Instead, ensure you’ve applied for exemptions and protested your property taxes. Finally, contact your local tax office and ask about payment plans or assistance programs.
Are You Paying Too Much in Property Taxes?
Now that you know how to pay property tax, there’s one more thing to consider before you fork over the money: Are you being billed the correct amount?
In reality, many people are overpaying their share of property tax.
This could happen for a couple of reasons. For one, your home may have been assessed for more than its worth. Remember—the valuation of your home largely influences the amount you pay in property tax.
The basic formula is your home’s assessed value ✕ your area’s property tax rate.
Your home valuation could be outdated if an assessor hasn’t visited in person recently. It might not reflect recent damage, for instance, or it may not be on par with improved, higher-value homes in your neighborhood.
If you live in an area with an assessment limit in place—a cap on the annual increase allowed for a home assessment—your valuation could be unfair. Newly constructed homes, in particular, tend to be overassessed to compensate for revenue lost on other homes due to the assessment limit.
You could also be overpaying if you’ve missed out on tax exemptions offered in your area. Many jurisdictions offer homeowners opportunities to exempt a portion of their home’s value from taxation. Some exemptions are specifically intended for senior citizens, veterans, and disabled individuals, but others—like the Texas homestead exemption—are open to anyone whose primary residence is in the area.
If you haven’t actively searched and applied for these opportunities, you’re paying too much in property taxes!
How Ownwell Can Help You Lower Your Property Taxes
Not sure if you’re overpaying or not? The team at Ownwell can help determine that for you—and potentially even get your bill reduced!
Ownwell specializes in helping property owners appeal their tax assessments. Our expert team works on your behalf to ensure you pay only your fair share of property taxes. If our analysis reveals your property was overassessed, we’ll handle every aspect of a property tax appeal, including filing the necessary applications, compiling evidence to support your case, shepherding your case through the system, including attending hearings for you.
We’ll also ensure you never pass up an exemption opportunity. We’ll do the research and if you’ve qualified for exemptions and missed them, we’ll apply retroactively for you.
Interested in getting a free assessment of your property taxes? Get the ball rolling now by answering a few quick questions.
Our customers save, on average, $1,148 on their property taxes—don’t miss out!
Put An End To Property Tax Headaches
Eventually, you’ll become familiar with the property tax payment process and it won’t feel so overwhelming. Unfortunately, not all aspects of property tax allow you to get so comfortable.
Your property taxes will always fluctuate due to changes in your home’s valuation or your municipality’s tax rate. This is a case where “expect the unexpected” applies! If you don’t keep a close eye on your annual bill—and take steps to rein it in—you might be overpaying (and stressing) unnecessarily.
Take the first step to minimize the stress associated with your next property tax bill by contacting Ownwell today!
