Number One Home Loans

Your taxes to be paid are part of your closing cost. The mortgage company will then add a monthly amount to your payment to pay the taxes next year, and so on. The same holds true for your insurance policy on the house.

Let’s say that your taxes are $1800, and your insurance is $600. That’s a total of $2400. The bank would add $200 to your payment to cover these amounts for next year, and the next, etc.

Financing $100,000 for 360 months at 6.0% interest, your house payment will be about $600. Then add the taxes and insurance to that. The above scenario would put your payment at about $800 per month.

$600 X 360 = $216,000 total payments for the house.

If you financed $100K for 240 months, the payment would be only $116 more, but it would save you $44,000 over the life of the mortgage.

$716 X 240 = About $172,000

$216,000 – $172,000 = $44,000 savings.

Best wishes, and God bless
References :
Homeownership experience

Property taxes are typically escrowed for your 1st home loan (and sometimes, but not always, homeowner’s insurance). That is not included in estimated home loan quotes (since that can vary depending on total value of home). But it is something to consider when you figure out the monthly payment you can afford.

You should get credit from previous owner for property tax through closing. Property taxes in WI are collected the year after they are from (ie, 2007 taxes are due in 2008). So if you closed on a home June 30 or July 1, 2008, you would not personally pay property tax in 2008, but would get credit for any remaining tax due this year and about half of 2008 property tax due in 2009. That would go into escrow, and escrow payments tacked onto your loan payments would build that up enough to pay taxes next year.

Note that federal deduction for property tax is only for tax you were actually liable for and paid. So you would get no property tax deduction this year and only about half of the 2008 tax due in 2009 (when paid from your escrow minus credit from previous owner).

Home loan interest is deductable (if you itemize) the year you start paying it. But you do not get a deduction for full year property tax until the 2nd full year you own the home.

Other states vary as to whether property taxes are due the same year or following year. So time line for full property tax deductability may vary in other states.
References :
I own land in Grant County, WI and 2007 property tax was/is due in 2 installments by Jan 31, 2008 and July 31, 2008.

For my home in IL, I never had insurance escrow, and got out of tax escrow when I refi’d after 3 years (to lower fixed interest for less years).