Discover everything you need to know about property taxes and if they’re covered in your mortgage payments.
Most people take out mortgages to buy a house. While mortgages account for the principal and interest, many of these financial products also include your property taxes. You’ll have to pay these annual taxes for as long as you own real estate, even after you pay off your mortgage. This guide will teach you key details about how property taxes are included in mortgage payments and what happens after you have paid off the mortgage. I am a certified personal finance counselor who has been writing about real estate for more than five years. We also spoke with two real estate experts when crafting this article.
Are Property Taxes Included in Your Mortgage?
In most cases, property taxes are included in your mortgage payments. Many mortgage lenders have you make monthly payments toward your property taxes. That way, you aren’t stuck with a big bill at the end of the year.
Nate Johnson, real estate investment expert at NeighborWho, explains how lenders add property taxes to your mortgage payments.
“It is relatively common for your property taxes to be part of your monthly mortgage payment. Most lenders set up an escrow account to hold more than just the loan's capital and interest. This is where they receive projected property taxes and homeowners' insurance as well. This setup helps make sure that those big, yearly costs are paid for on time, so you don't have to worry about them separately. A handy way to stay away from late fees and unpleasant shocks come tax time.”
Some states require quarterly property tax payments, while others only collect property taxes in the spring and fall. Your mortgage lender handles the property taxes and insurance if they include those expenses in your monthly mortgage payments.
How Do You Know if Your Mortgage Includes Property Taxes?
Although it’s a common practice for mortgage lenders to include property taxes in your mortgage payments, not everyone does it. That’s why it is important to check with a lender to make sure you’re all clear with your property taxes.
Adam Hamilton, CEO of REI Hub, explains how you can verify if you are automatically paying your property taxes by paying the bank each month.
“It is normal for property taxes to be included in mortgage payments. It’s not always the case, especially with private lenders, because they often aren’t required to do this, but it is pretty standard. To know if yours are included or not, check your monthly mortgage statement. If you are still unsure, you can always contact your lender directly and ask. It’s always better to double-check and be safe in case, for some reason, you are personally responsible for paying your property taxes out of pocket.”
Your mortgage statements or a representative at the bank will give you the answer. Most banks make it easy to contact them through multiple methods, such as email, phone and live chat. However, as Johnson explains, you usually get that information in advance.
“Your lender will usually let you know upfront whether property taxes are being handled through an escrow account. When you get preapproved for a mortgage or close on a house, they will break down your expected monthly payment into parts that show how much goes to the loan, insurance and property taxes. Keep in mind that these are just estimates until you finalize your home and policy details. If something changes, like property taxes going up, your loan should change your monthly payment and let you know what it is.”
How Do You Pay Property Taxes After Paying Off Your Mortgage?
Property taxes will stick around even after you have made mortgage payments. However, once you’re done with the mortgage, it’s no longer the bank’s responsibility to manage your property taxes. Johnson shares how homeowners can pay property taxes after becoming debt-free on their homes and rental properties.
“Once your mortgage is fully paid off, you're no longer paying property taxes through an escrow account via your lender. You should pay them straight to your local government instead. This could mean a one-time payment or smaller payments spread out over the course of the year, depending on where you live.”
It’s important to stay on top of the due dates since missing any payment can result in a lien or losing your house. You will have to stay proactive and may want to work with a tax professional, especially when you are making property tax payments without a bank for the first time.
What Determines Your Property Taxes?
Property taxes make up a portion of your mortgage, but knowing what influences property taxes can help you keep them low.
“There are two major things that determine your property taxes: the estimated value of your home and the local property tax rate. The tax appraiser in your area decides the estimated value, which is generally less than the market value. This is good for your pocket. The tax rate is set by your city or county and where you live can make a big difference in it.”
You can’t control how an appraiser assesses your home. However, if you don’t make any dramatic home improvements, you can keep your property taxes at their current levels. For instance, you will save money on property taxes if you get an above-ground pool instead of an inground pool. Nuances like these can keep more money in your pocket.
Staying On Top Of Property Taxes
In most cases, the mortgage lender will cover your property taxes. When you make mortgage payments, most of the monthly payment will go toward taxes. However, it’s your responsibility to stay on top of deadlines and property tax payments once you’re done with the mortgage.
Why You Should Trust Us
Benzinga has been covering real estate for over 15 years and has brought on various experts to strengthen its scope. Furthermore, I have been writing about real estate for five years and am a certified personal finance counselor. I have also written for additional publications like U.S. News & World Report and Newsweek.
FAQ
How do I know if my taxes are included in my mortgage?
You can check your monthly mortgage statements or call a bank representative to verify whether your taxes are included in your mortgage payments.
Will my property taxes go up if I pay off my mortgage?
No. Paying off your mortgage will not impact your property taxes. Property taxes will only go up if your property gains value or your location decides to raise its tax rate.
Does your mortgage go up if your homeowners' insurance goes up?
If homeowners insurance is included in your mortgage, your monthly mortgage payments will increase if your insurance premiums increase.
Sources
Johnson, Nate. Personal interview with the author. 23 Apr. 2025.
Hamilton, Adam. Personal interview with the author. 23 Apr. 2025.
Get a preapproval letter. Consumer Financial Protection Bureau. https://www.consumerfinance.gov/owning-a-home/explore/get-a-preapproval-letter/
About Marc Guberti
Marc Guberti is an investing writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.
