You’re sitting at the kitchen table, staring at a stack of mail that feels more like a threat than a delivery. Right on top is the property tax bill. It’s big. It’s always bigger than you remembered.
Now comes the choice. Do you let the bank handle it through that escrow account they set up when you bought the place, or do you take the reins yourself? Honestly, is it better to pay property tax with mortgage payments or just cut a check to the county twice a year?
Most people just go with the flow. They pay the monthly mortgage bill, the bank skims a bit off the top into a side bucket, and when the taxman comes knocking, the bank pays him. Simple, right? But "simple" usually has a price tag attached to it that most homeowners don't bother to calculate.
The Escrow Trap: Why Banks Love Your Tax Money
When you pay your property taxes through your mortgage, you’re using an escrow account. Think of it as a forced savings account that pays zero interest. You’re essentially giving the bank an interest-free loan.
If your annual property tax bill is $6,000, you’re paying $500 extra every single month. By the time the bill is actually due, the bank has been sitting on thousands of your dollars for months. In a high-interest savings environment—like what we've seen recently with rates hovering around 4% or 5%—that’s real money you're losing. If you kept that $500 a month in a HYSA (High-Yield Savings Account), you’d have a nice little steak dinner or a car payment’s worth of interest by the end of the year.
The bank calls it "convenience." I call it a missed opportunity.
But wait. There’s a catch.
Most lenders, especially if you put down less than 20% on your home, don't give you a choice. They require an escrow account. Why? Because if you don't pay your taxes, the government can put a lien on the house. The government always gets paid first—even before the bank. The bank forces you into escrow to protect their investment, not to make your life easier.
💡 You might also like: AOL CEO Tim Armstrong: What Most People Get Wrong About the Comeback King
The "Escrow Shortage" Headache
Have you ever received a letter from your mortgage servicer saying your monthly payment is going up by $300 because of an "escrow shortage"? It's a gut punch.
Property taxes aren't static. Local governments reassess values, or voters pass a new school bond, and suddenly your $5,000 bill is $5,800. Because banks are required by federal law (under the Real Estate Settlement Procedures Act, or RESPA) to keep a "cushion"—usually two months of payments—they overcorrect. They don't just ask for the $800 difference; they hike your monthly payment to cover the new higher tax and to rebuild that mandatory cushion.
It’s messy. It’s confusing. And it makes budgeting a nightmare.
Going Solo: The Case for Paying the County Directly
If you have at least 20% equity in your home, you can often request to "waive" your escrow. Some banks charge a small one-time fee for this—maybe 0.25% of the loan amount—but for many, it's worth it.
Why would you want this responsibility? Control.
When you pay your taxes yourself, you know exactly where the money is. You can keep it in an offset account or a high-yield savings account until the very last minute. You get the interest. You get the clarity.
There’s also the "credit card play."
📖 Related: Wall Street Lays an Egg: The Truth About the Most Famous Headline in History
Some savvy homeowners pay their property taxes using a rewards credit card. If your county allows credit card payments (and many do, though usually with a 2% or 2.5% processing fee), you can rack up massive travel points. If the fee is 2% but your card gives you 3% back in travel value, you’re essentially getting paid to pay your taxes. You just have to be disciplined enough to pay that credit card off immediately with the cash you’ve been stashing all year.
When the Mortgage Method Actually Wins
I know I just made escrow sound like a scam, but it’s not all bad. For a lot of people, the answer to is it better to pay property tax with mortgage is a resounding "yes" because of human psychology.
We are generally terrible at saving for big, lumpy expenses.
If you don't have an escrow account, you are responsible for coming up with several thousand dollars all at once. If your car breaks down in October and the tax bill is due in November, you might find yourself in a world of hurt. The mortgage-integrated payment acts as a "set it and forget it" safety net. It protects you from yourself.
Also, consider the paperwork. If you pay through your mortgage, the bank handles the communication with the tax assessor. They make sure the bill is paid on time. If they mess up and pay late, they are legally responsible for the late fees, not you. If you're the type of person who loses track of deadlines or hates dealing with government websites that look like they were designed in 1998, just stick with the escrow.
The Math of the "Escrow Waiver"
Let's look at a quick example.
Imagine a $400,000 home with an annual tax bill of $8,000.
If you escrow, you pay $666.66 extra every month.
If you manage it yourself and put that $666.66 into a savings account at 4.5% APY:
👉 See also: 121 GBP to USD: Why Your Bank Is Probably Ripping You Off
- Month 1: $666
- Month 6: $4,000 + interest
- Month 12: $8,000 + roughly $180-$200 in interest.
Is $200 a year worth the manual labor of logging into a county portal and making sure a check clears? For some, no. For others, that's three months of Netflix and a few pizzas.
Specific Nuances: FHA and VA Loans
If you have an FHA loan, you don't have a choice. The Department of Housing and Urban Development (HUD) mandates escrow for all FHA loans. Period. Same goes for many USDA loans.
VA loans are a bit more flexible depending on the lender, but usually, they strongly encourage or require escrow unless you have significant equity. If you’re in the middle of a refi or a new purchase with one of these government-backed loans, don't even waste your breath asking to pay taxes yourself—the answer is almost certainly no.
Real-World Risks of Doing It Yourself
I spoke with a real estate attorney in Florida last year who told me a horror story about a homeowner who decided to pay their own taxes. They missed a deadline because the bill was mailed to an old address. The county sold a "tax certificate" to an investor. Suddenly, this homeowner didn't just owe the taxes; they owed 18% interest to a private company that was now one step away from foreclosing on their home.
When you pay with your mortgage, the bank's massive legal department is the one watching the calendar. They have automated systems tied directly into municipal databases. The chances of a "missed mail" error are almost zero.
Actionable Steps for the Decisive Homeowner
If you’re leaning toward one side or the other, don't just sit there. Take these steps to optimize your situation.
- Check your equity. If you have more than 20% equity (meaning your Loan-to-Value ratio is 80% or less), call your mortgage servicer. Ask them: "What is your policy on an escrow waiver for property taxes?"
- Audit your escrow statement. Every year, your bank sends an Escrow Analysis. Look at it. See if they are holding too much of a "cushion." If they have more than 1/6th of your annual tax and insurance total as a surplus, you can often request a refund check for the difference.
- Run the "Interest Test." Look at your current savings account. If you aren't earning at least 4% interest, the benefit of paying taxes yourself is negligible. If you are, calculate your potential annual earnings on that tax money.
- Set up a "Tax Sub-Account." If you decide to pay yourself, do NOT leave the money in your main checking account. You will spend it. Open a separate high-yield account specifically labeled "Property Taxes" and set up an automated transfer from your paycheck.
- Confirm with the Assessor. If you move away from escrow, make sure your local tax office knows to send the bill to you and not the bank. This is where most people trip up.
The reality is that paying property taxes with your mortgage is the "standard" for a reason—it's incredibly hard to mess up. But if you're financially disciplined and want every penny working for you, breaking free from escrow is one of those small "wealth-building" moves that adds up over a decade of homeownership. Just don't forget the deadline. The taxman doesn't care about your excuses.