Understanding Property Taxes and Your Escrow Account — FAQ
Property taxes are an important part of homeownership and may affect your monthly mortgage payment. This guide explains how property taxes are calculated, how your escrow account works, and what tax relief programs may be available.
What Is Included in Your Monthly Mortgage Payment?
Your monthly mortgage payment may include:
- Principal: The amount applied to your loan balance.
- Interest: The cost of borrowing the money.
- Property taxes: Taxes charged by your local taxing authority.
- Homeowners insurance: Coverage that protects your property.
These four components are commonly referred to as PITI: principal, interest, taxes, and insurance.
Important: Principal and interest are based on your loan terms. Property taxes and insurance may change from year to year.
What Is an Escrow Account?
An escrow account is used to collect money for your property taxes and homeowners insurance.
A portion of your monthly mortgage payment is deposited into your escrow account. When your property tax or insurance bill becomes due, your mortgage servicer uses the available escrow funds to make the payment on your behalf.
Why Your Escrow Payment May Change
Your escrow payment may increase or decrease when:
- Property taxes change.
- Homeowners insurance premiums change.
- A tax exemption is added, removed, or expires.
- The previous escrow estimate was different from the actual amount due.
If the escrow account does not have enough funds to cover the bills, an escrow shortage may occur.
Helpful Tip: You may choose to make additional payments into your escrow account throughout the year. Additional funds may help reduce a future escrow shortage, but they do not guarantee that a shortage will not occur.
How Property Taxes Are Calculated
Property taxes are generally based on three main factors:
- Your property’s assessed value
- Your local property tax rate
- Any exemptions or tax relief programs you receive
General Property Tax Formula
Assessed Value × Local Tax Rate − Eligible Exemptions = Estimated Property Tax
The exact calculation may vary based on your state, county, city, or municipality.
Assessed Value
The assessed value is the value assigned to your property by your local tax assessor for tax purposes.
The assessed value is not always the same as the market value or appraised value.
Common Property Values
Market Value
The estimated price your home could sell for in the current real estate market.
Appraised Value
The value determined by a licensed appraiser, often during the mortgage or refinancing process.
Assessed Value
The value used by the local taxing authority to calculate property taxes.
Your local assessor may consider:
- Recent sales of similar homes
- Property size and location
- Building characteristics
- Improvements or renovations
- Local assessment guidelines
You may receive an assessment notice from your local government. In many areas, you can also review your assessed value through the local assessor’s website.
Can You Appeal Your Assessed Value?
You may have the right to appeal if you believe your property’s assessed value is incorrect.
Contact your local assessor’s office to learn about:
- Appeal deadlines
- Required forms
- Supporting documentation
- Review or hearing procedures
Supporting documents may include comparable property sales, photographs, property records, or an independent appraisal.
Filing an appeal does not guarantee that the assessed value or property tax amount will be reduced.
Property Tax Rates
Your property tax rate is established by local taxing authorities. Depending on where you live, your total rate may include taxes from:
- Your city or town
- Your county
- Your school district
- Fire or emergency service districts
- Special assessment districts
- Other local taxing authorities
The combined rates are applied to your property’s taxable assessed value.
Your property tax bill usually provides a breakdown of the taxing authorities and charges included in the total amount due.
When Are Property Taxes Paid?
Property tax billing and payment schedules vary by state and local jurisdiction.
Taxes may be due:
- Once per year
- Twice per year
- Quarterly
- On another schedule established by the local tax authority
For example, some Connecticut municipalities may collect taxes in one, two, three, or four installments. Other states or counties may collect taxes annually or in two installments.
Always review your property tax bill or contact your local tax office to confirm the payment schedule for your property.
Property Tax Exemptions and Relief Programs
Property tax exemptions or relief programs may reduce your taxable value or the amount of property taxes you owe.
Programs vary by state and municipality.
Common Property Tax Programs
Homestead or Homeowner Exemption
Some states offer a Homestead or Homeowner Exemption for a property that is used as the owner’s primary residence.
This exemption may reduce the taxable value of the home or the total property tax amount.
Veterans Exemptions
Eligible veterans, disabled veterans, or surviving spouses may qualify for a property tax exemption or reduction.
Senior Citizen Programs
Homeowners who meet age and income requirements may qualify for senior property tax relief.
Disability Programs
Individuals with qualifying disabilities may be eligible for a tax exemption, credit, freeze, or deferral.
Income-Based Programs
Some local governments offer property tax assistance to households that meet specific income requirements.
Surviving Spouse Programs
Certain jurisdictions provide tax relief for qualifying widows, widowers, or surviving spouses.
Connecticut Property Tax Programs
Connecticut does not offer a general statewide Homestead Exemption for all homeowners. However, borrowers may qualify for other state or local programs, including:
- Elderly homeowner tax relief
- Disability tax relief
- Veterans exemptions
- Disabled veterans benefits
- Surviving spouse benefits
- Income-based municipal programs
Program availability and eligibility may vary by town.
Contact your local Town Assessor’s Office to learn which property tax exemption or relief programs may be available.
Frequently Asked Questions
Why did my monthly mortgage payment increase?
Your payment may increase if your property taxes or homeowners insurance increased. An escrow shortage may also cause the monthly payment to change.
Does my mortgage servicer determine my property taxes?
No. Property values, tax rates, exemptions, and tax bills are determined by local taxing authorities.
Your mortgage servicer collects escrow funds and pays the tax bill based on the information provided by the taxing authority.
Who should I contact about my assessed value?
Contact your local city, town, or county assessor’s office.
Who should I contact about a property tax exemption?
Contact your local assessor’s office or tax office. They can explain available programs, eligibility requirements, and application deadlines.
Can my mortgage servicer apply for an exemption for me?
No. Property tax exemptions generally require the homeowner to apply directly with the appropriate local government office.
What happens after my exemption is approved?
The local taxing authority will determine when the exemption becomes effective and whether it changes the current or future property tax bill.
Once a revised bill or updated tax information is received, your escrow account may be reviewed and adjusted.
Can I add extra money to my escrow account?
Yes. You may make additional voluntary escrow payments. These funds may help reduce a future shortage, but property tax and insurance changes may still affect your monthly payment.
Where to Find Help
For questions about the following items, contact your local assessor or tax office:
- Assessed property value
- Tax rates
- Tax payment schedules
- Property tax bills
- Homestead exemptions
- Veterans exemptions
- Senior or disability programs
- Assessment appeals
For questions about your mortgage payment, escrow account, or escrow analysis, please contact our Customer Service or Escrow Department.
Important Disclaimer
Property tax laws, exemptions, eligibility requirements, application deadlines, and payment schedules vary by state and local jurisdiction. This information is provided for general educational purposes and does not constitute tax or legal advice. Contact your local tax authority for information specific to your property.