Gary H. Smith
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When Can You Expect Your Mortgage Payment to Reflect Your Successful Tax Appeal?

By Gary Smith
When Can You Expect Your Mortgage Payment to Reflect Your Successful Tax Appeal?

Homeowners who are wondering when they can expect their successful tax appeal to affect their mortgage payments may be waiting a while. While the appeal will impact the tax bill right away, it may be a few months before it impacts the mortgage payment. The tax bill will appear on homeowners’ monthly statements and will be what people should keep an eye on when paying their mortgage.

The following are what may change after a tax appeal.

Tax Assessments

A tax assessment is the local government’s estimated value of a home. In many cases, the county will make the tax assessment. The government will then use that estimated value as the basis for property taxes. These tax assessments can increase, decrease, or remain unchanged on a yearly basis. 

Arrears Payments

When paying property taxes via escrow, homeowners should eventually see a reduction in the tax assessment on monthly payments. The only downside is that this can take some time, many states pay property taxes “in arrears,” i.e., a year following the initial assessment. So, if an assessment is reduced this year, the change in tax payments won’t appear until next year.

Mortgage Escrow

The average monthly mortgage payment normally covers the mortgage along with other costs, including property taxes. Lenders will collect part of the annual tax bill on a monthly basis and keep it in an escrow account. The lenders will then pay the taxes once due. In doing so, lenders avoid property tax liens that help protect their own investment in the home.

Escrow Adjustment

A reduced tax assessment may not have any impact on a mortgage payment for a long period of time if the lender isn’t considering the influence of reduced taxes when determining what the monthly payment will be. Lenders normally review escrow accounts once every year to ensure they’re accurate in their contributions each month. An insufficient amount coming into the account will lead lenders to increase the escrow portion of tax payments. On the other hand, if too much is going into the account, the lender will reduce the borrower’s escrow contribution. In many cases, lenders may wait for the reduced tax bill to arrive a year after the assessment decreases prior to making any adjustments to contributions.

Following a successful tax appeal, these are the changes to look out for on subsequent mortgage payments.