Video transcript: Understanding Property Taxes

[upbeat guitar chords]

On screen:

Understanding Property Taxes

On screen:

Asheila, Mortgage Banker

Asheila:

You have city taxes, you have county taxes and these are things that pay for improvements in your community, as well as the civil services. Your police department, your fire department, the school district.

On screen:

James, Real Estate Attorney

James:

It's important, when you're buying a house or selling a house to understand how the property taxes are dealt with within the contract. All the taxes are done in arrears, so when you pay your tax bill, it's for a period of time in the past. So, if you're to buy a new home, you want to get a proration, you want to get compensation for that at the closing, so that you're fairly compensated when the bill comes in the future.

Asheila:

At closing, the seller is gonna be responsible for taxes, up until the date that you close on the loan. From that point forward, it's the buyer's responsibility.

On screen:

Ja, Mortgage Banker

Ja:

So, you have two options as a homeowner. You can choose to pay your taxes on your own, which means that essentially, you are responsible for paying the bills as they come due. A simpler option, that most consumers will opt for, is to have the lender go ahead and take care of that for you. We'll divide your total tax bill, into 12 installments.

James:

So it goes into the escrow account, which is like a forced savings account, so when the taxes come due, the homeowner doesn't have to come up with additional money, it's already there.

Ja:

A lot of clients may shy away from an escrow account because they feel like they're giving money to somebody else for them to collect interest on, but reality is, is that, this is not an interest bearing account for the lender. It
is solely for the benefit of the homeowner.