Oregon Mortgages

Oregon Property Tax Confusion

This seems to be a confusing issue for most consumers when buying, selling or refinancing a home. I’ve even had to do some in-depth explaining to people during a refinance exactly how this process works. I hope this blog will help solve some of the questions.Some quick basics for property taxes in Oregon:

• The tax year runs from July 1st to June 30th
• Taxes are (should be) paid in November
• Taxes are ALWAYS in advance ADVANCE

Most people want/are required (per the lender depending on Loan to Value ratios) to have their taxes included in their payment. It makes it easier for everyone and you don’t get hit with a nice little bill right before Christmas. At the time of your loan your lender will set up an “Escrow Account” and “Impound” your taxes. In simple terms they are breaking your taxes down into 12 monthly payments and adding that into your mortgage payment every month. Every payment you make they are taking that tax payment and putting it into the escrow account. When your taxes are due they will cut a check to the county for you.

Example:

Annual taxes: $2,400.00 / 12 months = $200/month
Mortgage Payment: $1,200.00/month + Tax Impound ($200/month) = $1,400.00

*The confusing part (for most people) comes when you want to buy or sell a property since taxes are paid in ADVANCE.*

Sellers: Let’s say you sell your home in this coming March of 2008 and your taxes are $2,400 annually. They have already been paid so naturally you would want reimbursed since you will not be living there the entire tax year. Simply put, you would be reimbursed for the months that the buyer would be occupying it. Since you wouldn’t be there for 4 months (March through the end of June) you would get an estimated $800.00 from the person purchasing your home.

Buyers: Let’s say you are the person purchasing the home above. Naturally you don’t want to pay the taxes for someone else to live there (which I’ve had quite a few people think that is what they were doing). Since the Seller has paid the taxes already you would be required to reimburse him/her for the months that you would be occupying the property (this would show up in your settlement charges at closing) which would come to that same $800.00 for the 4 months.

Refinancing: When you change lenders you have to set up an entirely NEW impound account. The number of dollars they would impound at closing will vary depending on the year. Let’s again assume a March 1st closing date. You’ve already been paying your monthly installments since July and have accumulated $1,600 into this escrow account. But because you are refinancing your property your new lender (if you choose to impound the taxes) will require you to pay (through loan proceeds not out of pocket) that same $1,600.00 to set up your escrow account. Then the lender would deduct that $200.00 every month and at it to the account. When July comes around you would have the full $2,400 in the account and your taxes will be paid.

“But Rick, I already paid it once, why do I have to pay it again?”

Well you are/aren’t paying it twice. Yes you will be required to impound that money again but when you close the loan and your current mortgage is paid off your old lender will close out all accounts for you. They will then see that you have an overage in your escrow account and they will refund you that $1,600. Unfortunately that typically takes 4-6 weeks but you do get it back.

Rick Grand
Worldwide Mortgage Inc.
Cell: 541-521-1011
Fax: 541-465-8894

Oregon Mortgages
Oregon Real Estate