Many factors affect the amount of property taxes paid as a homeowner, such as the tax rate set by a local government and the value of a home valuation. In general, refinancing your mortgage has no complete impact on property taxes. Here’s what you need to know.
How does refinance a mortgage affect property taxes?
Refinance your mortgage or at least not in direct. However, there may be an impact accordingly Types of refinance you do:
- Simply swapping your current mortgage at a new tax rate and term will usually not cause property tax changes.
- a Cash-out refinance If you use cash for modifications, it may affect property taxes. These upgrades can cause a revaluation of your home’s valuated value and property tax liability.
Additionally, new terms (especially when the lender is different) may affect how you secure cash from your property tax budget.
“Homeowners should consider whether their new loan requires property tax exemption, meaning they pay monthly on loan payments — or whether they pay twice a year outside the loan,” says Greene-Lewis. “This is a consideration as it can depend on your finances and income flow. Some people prefer to pay property tax twice a year instead of making that conflict from your pocket every month.”
However, if you are choosing a new lender, the lender may have different escrow requirements and you may need to fund your escrow account before the old lender can refund your balance. Some lenders do not give borrowers the option to self-pay property tax.
Does a refinance valuation affect property taxes?
Property tax is based on House valuation amountnot the evaluated value. The value value is usually determined by a professional appraiser, not by a local tax authorities, when a borrower applies for a mortgage to purchase a home or a refinance.
Pay property tax when refinancing
Just like when you closed your original mortgage, refinancing to a new mortgage will include a budget for closing costs, including property taxes. Make sure you understand:
- Where you are in the tax year: Depending on where you live and when you close, your property tax may already be covered. For example, in Illinois, property taxes are typically scheduled for June 1 and September 1. In Arizona, it is October 1st and March 1st. If you are currently escrowing these payments with your lender or servicer, please check if you have already made payments for that year. If you are paying your taxes yourself, check this with your local tax authorities.
- Amounts you may need to pay: If your new lender requires you to escrow tax payments, you will likely be in charge of prepaid property taxes at the time of closing. The amount is based on your local tax payment date.
Next steps to refinance your mortgage
If you are considering refinancing your mortgage, shop to find the most competitive one interest rate. Think about your time at home – our Refinance Breakeven Calculator It helps you identify when you notice savings.
