Does Your Mortgage Include Property Taxes? | Escrow Or Not

Many mortgages collect property tax through an escrow account, but some loans leave the bill to you, so your monthly payment may not cover it.

You can’t tell from the payment amount alone. Two buyers can borrow the same amount at the same rate and still see different monthly totals, because one payment includes taxes and the other doesn’t. This one detail can swing your budget by hundreds per month and can also trigger late fees if you assume the lender is paying a bill that’s still in your name.

What “included” means on a mortgage payment

Property taxes are a separate bill set by your local authority. Your base mortgage payment is principal and interest. Taxes only feel “part of the mortgage” when your servicer collects tax money with each monthly payment and pays the tax bill when it comes due.

How escrow fits in

In the United States, that setup is called escrow. The servicer holds your tax money in an escrow account and disburses it to the tax authority on the due date. Servicers must also follow federal rules on escrow accounting and borrower disclosures.

Why this varies by country

Outside the U.S., mortgages often do not collect property-related local taxes. In the UK, Council Tax is billed to the resident and paid to the local council, not bundled into the mortgage payment. GOV.UK Council Tax overview. In Ireland, Local Property Tax is handled through Revenue payment choices like single payment, phased payments, or deduction at source, not a typical mortgage-servicer escrow setup. Revenue guidance on paying Local Property Tax.

Why some mortgages include property taxes and some don’t

Escrow lowers the chance of a missed tax bill that could become a lien. It also spreads a large annual or semiannual bill into monthly chunks. Still, escrow is not automatic.

Loan rules and down payment

Many lenders require escrow when the down payment is small or when the loan program sets that rule. Some lenders allow an escrow waiver if you put more down, meet credit and reserve targets, or pay an escrow waiver fee.

Tax swings after you buy

Taxes can jump after a purchase when the home is reassessed at a new sale price. A servicer’s escrow review can also change your monthly payment if the estimate was low in year one.

Fast ways to tell if your mortgage payment includes property taxes

You can confirm this in minutes with two checks: your current mortgage statement and your closing paperwork.

Check your monthly statement line items

Look for a breakdown. If you see a line for escrow, taxes, or “escrow payment,” the servicer is collecting money for bills like property taxes. If you see only principal and interest, and maybe mortgage insurance, taxes are being handled outside the mortgage payment.

Check your closing disclosures

In the U.S., the Loan Estimate and Closing Disclosure usually show whether escrow is included, plus projected taxes and the monthly amount collected. If you waived escrow, the disclosure often shows a waiver note or a line item that confirms taxes and insurance are not included.

Check the tax authority’s payment history

Many tax portals show who paid the last bill. If your servicer paid, the payer name may match a mortgage company brand instead of your name. This check also helps when servicing transfers happen and statements get confusing for a month or two.

Does Your Mortgage Include Property Taxes? What can change later

The answer can change over time. A loan that started with escrow can end up without it, and a loan that started without it can end up with it, based on your terms and what happens during the loan.

Escrow can be added after problems

Some mortgage contracts allow the servicer to start collecting escrow if property tax bills or insurance bills are missed. When escrow is added, your monthly payment rises because taxes are now collected monthly.

Refinancing can reset the setup

A refinance is a new loan, so the new servicer may require escrow even if the old loan did not. If you care about keeping an escrow waiver, ask before you lock the refinance.

How escrow math works and why your payment can jump

Escrow feels simple until the yearly analysis. If you want the formal rule language, see the CFPB escrow account rule (Regulation X, 12 CFR 1024.17).

The servicer estimates what taxes will be over the next year, spreads that total across 12 months, and checks whether the account will have enough to pay the next bills on time. If the account is short, the servicer collects extra to catch up. That’s the moment many homeowners see a payment jump.

Two drivers: higher estimates and shortage catch-up

If your tax bill rises, next year’s estimate rises too. If the rise hits mid-year, the account may also be short for the current year’s bill. That can create a double lift: a higher monthly escrow amount plus a temporary shortage repayment.

Surplus years

If the servicer collected more than needed, you may get a refund check or a lower monthly escrow collection for the next cycle. Your annual escrow statement tells you which path happened.

Common situations and what they mean

Situation	What you’ll see	Who pays the tax bill
U.S. loan with escrow	Statement shows escrow line and higher monthly total	Servicer pays from escrow
U.S. escrow waiver	Statement shows principal and interest only	You pay the tax office directly
Reassessment after purchase	Payment rises after escrow analysis	Servicer pays, monthly collection rises
Escrow added mid-loan	New escrow line appears; payment increases	Servicer pays once active
UK mortgage	Council Tax billed outside the mortgage	You pay the local council
Ireland mortgage	LPT paid through Revenue payment options	You pay Revenue through your chosen method
Refund or lower escrow collection	Refund check or reduced escrow line next year	Servicer still pays bills from escrow
Tax paid by you during a servicing switch	Portal shows your payment, not the servicer	You paid, often to avoid a late fee

If you pay taxes yourself, build a simple system

Paying taxes outside the mortgage is normal. It also means you need a plan for due dates and cash. A mortgage can be current while the tax bill is late.

Set a monthly “tax fund”

Take last year’s bill, divide by 12, and move that amount into a separate savings account each month. If your tax office bills twice a year, still save monthly so the cash is ready. Review the amount after any reassessment or rate change.

Track the due date on a calendar

Put the due date in your phone calendar with a reminder a few weeks earlier. If your tax office offers autopay, set it up and still check the first payment so you know it worked.

If taxes are collected in escrow, still verify the payment

Escrow removes the due-date chore, but you still want proof the bill was paid. Mistakes happen, and fixing them is easier when you catch them early.

Confirm the bill shows “paid”

After the usual due date, check the tax portal for a paid status. If the portal is slow, call the tax office. If there’s a mismatch, contact the servicer and ask for the disbursement trace and the parcel number they used.

Read the annual escrow statement like a budget update

Focus on three lines: projected tax payments, what was paid, and the new monthly escrow amount. If the projection looks off, ask which tax amount the servicer used and whether the home was reassessed.

Know the tax reporting basics in your area

In the U.S., property taxes may be deductible only if you itemize, and state and local tax limits can apply. The IRS explains how to report those taxes on Schedule A. IRS Instructions for Schedule A (Form 1040). If you’re outside the U.S., tax treatment differs, so use your local tax authority’s current guidance.

Choosing escrow or paying the tax bill yourself

If you have a choice, both paths can work. The real question is which one fits your habits and your cash flow.

Look at your billing schedule

If your area bills once or twice a year, the lump-sum payment can feel steep. Escrow spreads that cost across the year. If you already save monthly for other bills, paying taxes directly can feel just as smooth.

Ask what an escrow waiver costs

Some lenders charge a one-time fee for a waiver, or they price it into the rate. Ask for the numbers in writing so you can compare a smaller monthly payment against the extra cost of the waiver.

Plan for year-one estimates to be wrong

Year one is where surprises happen. A tax bill based on the prior owner’s assessed value can be lower than what you’ll owe after reassessment. If you use escrow, a later adjustment can raise the payment. If you pay taxes yourself, the bill can jump at the next due date. Either way, build a buffer in your budget.

Checklist to confirm what you’re paying

Step	What to check	What you confirm
Read the latest mortgage statement	Payment breakdown lines	Escrow line present or absent
Open your closing disclosures	Escrow section and projected taxes	Escrow included or waived
Check the tax portal history	Payer name and paid date	Servicer paid or you paid
Verify the next due date	Local billing calendar	When the bill must be paid
Plan for reassessment	Assessed value updates after purchase	Chance of a higher next bill
Review escrow statements yearly	Shortage, surplus, new monthly amount	Why the payment changed
Save monthly if you waived escrow	Automatic transfer into savings	Cash ready before the due date