Can I Pay My Own Property Taxes Without Escrow?

Property taxes are a recurring expense for homeowners, funding local services. Many homeowners pay these taxes as part of their monthly mortgage payment, which is held in a lender-managed escrow account. This account bundles property taxes and homeowners insurance with a mortgage, ensuring bills are paid on time. Some homeowners, however, may prefer to manage these payments themselves for more direct control over their finances, which is possible for those who meet specific financial criteria.

Determining Your Eligibility to Pay Directly

A lender’s decision to allow a borrower to pay property taxes directly hinges on an assessment of financial stability. A primary factor is the loan-to-value (LTV) ratio, which compares the mortgage amount to the property’s appraised value. Lenders require an LTV of 80% or less, meaning the homeowner has at least 20% equity. This equity provides the lender with a security cushion against a borrower defaulting on tax payments.

The type of mortgage you have also plays a role in your eligibility. Government-backed loans have specific rules regarding escrow accounts. For instance, Federal Housing Administration (FHA) loans mandate an escrow account for the entire life of the loan. Borrowers with FHA loans cannot opt out of this requirement unless they refinance into a different type of loan.

Loans guaranteed by the Department of Veterans Affairs (VA) do not have a strict VA requirement for escrow, but most lenders impose their own. To waive escrow on a VA loan, lenders will look for criteria similar to conventional loans, such as a strong credit score and home equity. Conventional loans, which are not insured by a government agency, offer the most flexibility, but the final decision rests with the lender.

A lender will also scrutinize your payment history before approving an escrow waiver. A consistent record of on-time mortgage payments is a prerequisite. Lenders require that a loan be at least one year old with no 30-day late payments within the last 12 months. This demonstrates financial discipline and gives the lender confidence that you will be responsible for making large, lump-sum tax payments on your own.

The Process for Requesting Escrow Removal

Once you determine you meet the lender’s criteria, the next step is to formally request the removal of your escrow account. The process begins by contacting your mortgage servicer. You can find the contact information on your monthly mortgage statement or the lender’s website. Some lenders have a specific “escrow waiver” form available for download.

Lenders require a formal request in writing. This written communication should state your desire to cancel the escrow account and pay your property taxes and homeowners insurance directly. It is helpful to include your full name, property address, and loan account number. Submitting this request formally creates a documented record of your communication.

After you submit the formal request, the lender will begin its review process. They will verify your eligibility by checking your loan’s current LTV, payment history, and other internal requirements. You will receive a final notification in writing that either approves or denies your request, which can take around 30 days.

Managing Direct Property Tax Payments

Receiving approval to pay your own property taxes marks a shift in financial responsibility. Your first task is to identify the correct local government body that collects these taxes. This is a county-level office, often named the tax assessor-collector or county treasurer. You can find this information on a previous tax statement or by searching your local government’s official website. This office is where your payments will be sent and is your primary source for tax-related information.

Understanding the payment schedule is necessary to avoid penalties. Property tax bills are issued annually, but the payment may be due in a single lump sum or split into two semi-annual installments. Each jurisdiction has its own specific due dates, and missing them can result in significant late fees and interest charges. Not receiving a bill in the mail is not considered a valid excuse for non-payment.

Local taxing authorities offer several methods for submitting payment. Most provide an online portal where you can pay directly from a bank account or with a credit card, though a convenience fee may apply for card payments. Traditional methods, such as mailing a check with the payment coupon from your tax bill or paying in person at the tax office, are also available.

The challenge of managing your own property taxes is budgeting for a large expense that comes only once or twice a year. To avoid financial strain, create a dedicated savings plan. A practical approach is to open a separate high-yield savings account for property taxes. By dividing your estimated annual tax bill by 12 and automatically transferring that amount into the account each month, you can ensure the funds are available when the bill arrives.