The Mortgage Refinance Process
Understanding When Property Taxes May Be Due
If you’re refinancing a home in Texas between October 1 and January 31, property taxes may affect your closing costs and escrow refund.
Texas property taxes are generally billed in the fall. Although taxes are typically considered delinquent after January 31, they may already be due and payable before then. If your property taxes remain unpaid when you refinance, they may need to be paid at closing.
If your existing mortgage includes an escrow account, the timing of the tax payment and your old loan payoff can affect how those funds are handled. Understanding the possible scenarios can help you prepare for the costs and timing involved.
Understanding Property Taxes and Your Escrow Account
If your property taxes are due at closing, the title company generally collects the required funds and sends payment to the taxing authority. Meanwhile, your current mortgage servicer may also be preparing to pay the taxes using the money in your existing escrow account.
Depending on which payment is processed first, one payment may be returned and refunded. Here are three possible scenarios:
1. Your Escrow Payment Has Not Been Issued
If your current mortgage is paid off before your servicer sends the escrow funds to the county, the taxes can be paid through closing. Any remaining balance in your old escrow account may then be refunded to you through the normal escrow-refund process.
2. Your Servicer Sends the Escrow Payment After the Closing Payment
If the title company’s payment is processed first, the county may return the duplicate escrow payment to your former mortgage servicer. Because your old loan has been paid off, the servicer would then handle the return of those funds to you.
3. Your Servicer’s Escrow Payment Is Processed First
If the county processes the escrow payment before the title company’s payment, the county may return the duplicate payment to the title company. The title company would then handle returning those funds to you.
Understanding the Timing of Your Refund
In these scenarios, duplicate tax payments may eventually be returned, but the funds can take time to reach you. During that period, you may temporarily be without access to the money.
That timing is worth considering when planning your refinance. If the potential savings justify moving forward, waiting solely for an escrow refund may not be necessary. However, the best approach depends on your loan terms, closing figures, and available funds.
There may also be different ways to structure the payment of closing costs. Read How to Pay for Closing Costs to learn more about the options available.
If you’re refinancing during property tax season and have questions about your payoff, tax payment, or escrow refund, contact the Mortgage Mark Team so we can help you understand what to expect.As always, please call us if you have any questions.