What Happens to Property Taxes When You Pay Off Your Mortgage
TL;DR
When you pay off your mortgage, your escrow account closes and you become directly responsible for paying property taxes to the county. Your lender will refund any remaining escrow balance within 30 days. After that, you need to set up your own system for tracking due dates and making payments. Your property tax amount does not change because the mortgage is paid off. What changes is that nobody is managing the payments for you anymore. Set up calendar reminders and consider auto-pay through your county to avoid missing deadlines.
The Escrow Account Closes
If you had an escrow account, your mortgage servicer managed your property tax payments. When the mortgage is paid off:
- The escrow account is closed
- Any remaining balance is refunded to you within 30 days
- The lender notifies the county that they are no longer the responsible party for tax payments
- Future tax bills come directly to you at the property address
What You Need to Do
Immediately
- Contact your county tax collector to update the mailing address for tax bills (if different from property address)
- Find out when the next property tax payment is due
- Verify that the most recent payment was made before the escrow account closed
Set Up a System
- Set calendar reminders for 2 weeks before each due date
- Consider setting up auto-pay through your county's online portal
- Open a dedicated savings account and deposit 1/12 of your annual tax bill each month
Common Mistakes
- Missing the first direct payment: The transition from escrow to direct payment is when mistakes happen. Double-check the schedule.
- Not expecting the lump sum: Instead of $500/month in escrow, you now owe $3,000-$6,000 in lump-sum payments. Budget for it.
- Ignoring the bill: With no lender watching over your shoulder, it is easy to forget or procrastinate. Penalties are expensive.
Your Tax Bill Does Not Change
Paying off your mortgage does not affect your assessed value, tax rate, or exemptions. Your property tax stays the same. The only thing that changes is who is responsible for making the payment.
This is a good time to review whether your tax bill is correct. Use our free property tax analyzer to check your assessment. If you have been overpaying through escrow for years, an appeal could lower your bill going forward.
Frequently Asked Questions
What Happens to Property Taxes When You Pay Off Your Mortgage?
When you pay off your mortgage, your escrow account closes and you become directly responsible for paying property taxes to the county. Your lender will refund any remaining escrow balance within 30 days. After that, you need to set up your own system for tracking due dates and making payments.
What should I know about the escrow account closes?
If you had an escrow account, your mortgage servicer managed your property tax payments. When the mortgage is paid off:
What should I know about your tax bill does not change?
Paying off your mortgage does not affect your assessed value, tax rate, or exemptions. Your property tax stays the same. The only thing that changes is who is responsible for making the payment.