Closing Cost for prepaid Property Tax (10 months)

Buying & Selling Real Estate
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Closing Cost for prepaid Property Tax (10 months)

Kevin Kim
Member since 2020 · 69 posts · 12 votes

Hello 

I have closed my first investment property last Sep. Noticed my loan lender closing cost details shows they charged 10Months Property tax prepaid. My question is why do i have to pay 10Months property tax in advance? My each month mortgage payment is already included Property tax and Insurance. I am asking lender(better.com) but haven't heard any answer yet.

Appreciate any help.

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  • Grant Thompson
    Investor · Washington, D.C · Member since 2019 · 113 posts · 93 votes
    4y

    @Kevin Kim

    It depends on the municipality, but real estate taxes are typically paid once a year in lump sum form. The servicer of your loan will handle charging taxes on a monthly basis and holding them in an escrow account and then paying the tax bill when due. Without knowing too much about the municipality or property you purchase it is hard to say exactly why 10 months was withheld, but this is fairly normal as the lender calculates which amount of $ needs to be set aside for the upcoming tax bill.

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  • Kevin Kim
    OP
    Member since 2020 · 69 posts · 12 votes
    4y

    Thanks Grant. I got answer from better.com as well. now it makes sense.

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