03
Jan
By First Rate Financial Group
Home Mortgage Tips

The Role of Mortgage Escrow Accounts in Property Tax and Insurance Payments

A mortgage escrow account, also known simply as an escrow account, is a financial arrangement set up by a mortgage lender to manage and disburse certain payments related to the property on behalf of the homeowner. The purpose of an escrow account is to ensure that essential expenses, such as property taxes and homeowners’ insurance, are paid on time.

Here’s how a mortgage escrow account works:

Creation of Escrow Account: When you obtain a mortgage loan, your lender may require you to establish an escrow account. This account is typically separate from your mortgage loan account.

Monthly Payments: As part of your monthly mortgage payment, you contribute a prorated amount toward property taxes, homeowners insurance, and, in some cases, private mortgage insurance (PMI). The total amount is divided by 12, and a portion is added to each monthly mortgage payment.

Lender’s Responsibility: The lender is responsible for making payments from the escrow account when they come due. This includes paying property taxes and homeowners’ insurance premiums directly to the relevant authorities or insurance companies.

Annual Analysis: Each year, the lender performs an escrow analysis to ensure that the correct amount is being collected to cover expenses. If there is a shortfall or surplus in the account, adjustments may be made to your monthly payment to reflect the anticipated expenses for the coming year.

Changes in Taxes or Insurance Premiums: If there are changes in property taxes or insurance premiums, the lender adjusts the escrow account accordingly. This can lead to changes in your monthly mortgage payment.

Surplus or Shortage: If there is a surplus in the escrow account after all expenses are paid, you may receive a refund. Conversely, if there is a shortage, the lender may increase your monthly payment to cover the shortfall.

Homeowner’s Responsibility: While the lender manages the escrow account, it’s still the responsibility of the homeowner to stay informed about changes in property taxes and insurance costs. Homeowners should review their annual escrow statements and communicate with their lender if they have concerns or questions.

Having an escrow account can be convenient for homeowners because it spreads out the cost of property taxes and insurance over the year, making it easier to budget for these large annual expenses. Additionally, it helps ensure that these crucial payments are made on time, reducing the risk of liens on the property or lapses in insurance coverage.

10
Aug
By First Rate Financial Group
Mortgage

Disputing Your Property Tax Assessment Can Save You Money

Disputing Your Property Tax Assessment Can Save You MoneyProperty taxes can be a substantial financial burden for homeowners and property owners. Each year, local governments assess the value of properties to determine the amount of property tax owed. However, these assessments are not always accurate and can result in higher tax bills than necessary. Disputing your property tax assessment is a proactive way to potentially save money and ensure you’re paying a fair and equitable amount.

Reasons for Flawed Assessments:

Property tax assessments are not immune to errors and discrepancies. Several reasons can lead to an inaccurate evaluation of your property:

  1. Market Value Misjudgment: Assessors may rely on outdated or incorrect data, leading to the misjudgment of your property’s market value.
  2. Assessment Methodology: The methodology used to calculate property values might not consider all relevant factors, such as recent improvements or neighborhood changes.
  3. Comparable Properties: Assessors may use inappropriate comparables that lead to an inflated assessment that does not accurately reflect your property’s true value.
  4. Data Entry Errors: Mistakes can occur during the data entry process, resulting in incorrect information being used to determine your property’s value.

Steps to Dispute Your Property Tax Assessment:

If you believe your property tax assessment is flawed, follow these steps to initiate the dispute process:

  1. Review Your Assessment: Obtain a copy of your property tax assessment and thoroughly review it for any inaccuracies or discrepancies.
  2. Collect Evidence: Gather evidence to support your claim, such as recent property appraisals, photographs, or documentation of any property-related issues.
  3. Contact the Assessor’s Office: Reach out to the local assessor’s office to inquire about their specific procedures for filing a property tax appeal.
  4. File an Appeal: Submit a formal appeal with all the supporting evidence to the relevant authorities within the designated timeframe.
  5. Attend the Hearing: If a hearing is scheduled, be prepared to present your case and provide evidence to support your claim.
  6. Consider Mediation: Some jurisdictions offer mediation as an option to resolve assessment disputes. Mediation can be a less adversarial approach to reach an agreement.
  7. Consult with Professionals: If necessary, seek advice from real estate professionals, appraisers, or tax consultants to strengthen your case.

Disputing your property tax assessment is a proactive way to ensure you’re paying a fair amount of property tax and not overpaying due to inaccuracies or flawed evaluations. By taking the time to review your assessment, gather evidence, and follow the appropriate procedures, you can potentially save a considerable amount of money and promote fairness within the local tax system. 

02
Jul
By First Rate Financial Group
Home Mortgage Tips

It Is Tax Time Again Learn About Tax Deductions and How to Write off Your Home Mortgage Interest

It Is Tax Time Again Learn About Tax Deductions and How to Write off Your Home Mortgage InterestMuch to the frustration of taxpayers all over the country, the tax-filing season begins in January and runs through April 15 of each year. The year 2020 brought us many changes, including an extension on filing taxes. Taxes this year are due on July 15th. Are you ready?

As the current tax season approaches, it presents an opportunity to help tax-payers clarify their responsibilities and remind them of certain important tax deductions that may be available.

Filing Responsibilities

Every person in the United States is required to file their tax returns by July 15 so long as they have some form of qualifying income. Based on filing status, income and available deductions, tax-payers must file a 1040EZ, 1040A or 1040 (long-form for itemized deductions).

Qualifying income is generally defined as, but not limited to wages, commissions, miscellaneous income (rental, interest), investment income and alimony. These forms of income are reported on a periodic basis to the IRS and State governments by employers, banks, contract employers and/or other responsible parties.

The most common tax receipts that must be sent to tax-payers by January 31 are W-2s and 1099-Misc forms.

Calculating Taxes

While the IRS requires individuals to report all forms of income, they also allow certain living costs to be used as deductions to offset income in order to arrive at a “taxable income” number on which tax liabilities are calculated.

If a tax-payer’s deductions fail to exceed the combined statutory standard deduction,, they will want to file the 1040EZ or 1040A. If itemized deductions exceed this number, the 1040 becomes preferable.

Mortgage Interest Deduction

For a majority of tax-payers, the largest tax deduction available is usually mortgage interest paid on secured debt where the primary residence and in some cases second homes or rental property serve as collateral. In most of these cases, all interest paid during the year is deductible.

If the mortgages are large enough, the total interest paid will typically push the tax-payer into position to itemize deductions. It is important for tax-payers to read the rules related to mortgage interest deductions as they tend to be somewhat complicated.

Other Important Deductions to Consider

Once a tax-payer qualifies to itemize deductions, many other living expenses become deductible. Other prominent deductions include property taxes, charitable contributions, childcare costs, qualified moving expenses, certain work related expenses and certain medical expenses.

Prior to using any deduction, it is incumbent on the tax-payer to review deduction guidelines in order to determine applicability.