Property Taxes May Be Due
If you’re refinancing a home loan between October 1st and January 31st this article is applicable to you. In Texas the property taxes are technically due as soon as they “post” in early October. Once the county posts the taxes the money is due but the payment is not considered late until after January 31st. Therefore, if you’re closing on a refinance home loan and the property taxes show due and payable, those taxes will have to be satisfied at closing no matter what.
Taxes Due And Your Escrow Account
If you do have an escrow account and the taxes are showing due, there are a number of scenarios that can exists. For all the examples below, let’s assume the taxes are due and therefore are paid at closing. Upon funding the title company will then wire the money to the county to pay the bill. Here’s what could happen:
- Escrow Check Not Issued: if your current mortgage is paid off before the check is cut to the county then you’ll then get your Escrow Refund as you would with a “normal” refinance.
- Escrow Check Issued but Title’s Money Is First: let’s assume that the tax funds collected at closing are sent by the title company to the county and those funds are processed before the escrow money. In this case the county will reject the escrowed money and return it to the mortgage servicer. The mortgage servicer will then forward you the refund since the taxes were paid at closing and they no longer have your mortgage.
- Escrow Check Issued and Escrow Money Is First: if the escrowed money is processed before the title company’s money, the county will then reject the title company’s funds and return the money to them. They in turn will refund you the money upon receipt.
In either aforementioned scenario you’ll get the “extra” money back but you’ll essentially not have those funds for about 30 to 60 days. While this is not ideal, it may be worth it if rates are low enough for refinancing; after all, you wouldn’t want to wait and jeopardize rates moving higher just because of the tax bill timing. Remember, there are different methods to pay for the taxes besides paying cash at closing (see How To Pay For Closing Costs).
As always, please call us if you have any questions.