REFI HACK 101: Paying Property Taxes Within your Refinance – Keep Cash in Your Pocket
Given how 2020 has gone for much of the country, many people may be feeling the stress of tighter finances than ever before. With that in mind, refinancing your home may be exactly the answer to some of your biggest worries right now, like “how am I going to get through the holidays and pay my property taxes”?
Owning a home is not only the American Dream, it’s one of America’s greatest wealth building opportunities to exist. Home ownership comes with a great deal of responsibility, which can often mean spending time or money on things related to your home. The end of year is one of those big responsibilities that hits us pretty hard, when it’s time to pay your property taxes.
Unfortunately, property taxes are something all homeowners have to pay. There’s no way around that, but refinancing can help soften the burden, and our team at Blink Lending is here to help.
If you are one of the many people who choose to finance your properties with mortgages, odds are you may have set up Escrow accounts to handle the impending property tax bills. Individuals who look for more hands-on control of their finances may instead pay their property taxes separate from their mortgage payments. Either way you choose to pay them, the point of the story is: they must be paid.
In the state of Texas, property taxes are due by Jan 31st and are considered late on February 1st. This is relative because if you want to pay your taxes with a refinance you must close and fund by January 31st to avoid doing a cash out loan. With that being said, the below scenarios explain the most likely scenarios.
For those who are currently escrowing for their taxes and insurance: When you refinance your mortgage, the new mortgage company pays your upcoming taxes and insurance within the new loan. Meaning that your previous escrow company refunds you what’s remaining in their escrow account, which gives you extra cash in your pocket (just in time for the holidays).
For those who are NOT escrowing for taxes and insurance, you have an even better benefit. Instead of paying the taxes out of your pocket, which could be expensive if you own multiple properties, you can wrap the property taxes within the costs of the new loan without the loan being considered a “Cash Out Refi.” This enables you to use the lenders cash to pay your taxes, and still stay within the rates and terms of a “Rate and Term Refi.”
With real estate markets doing extremely well in Texas, the refinance may be the answer to keep cash in your pocket and even saving hundreds of dollars per month with historically low interest ratees.
Bonus Benefit: If timed correctly, you have the ability to bypass two mortgage payments on top of everything else. Let’s say you close your refinance on Dec 1st, 2020. The new lender will wrap your prepaid interests into the new loan and essentially give you two more months without having to dip in your pocket to pay a mortgage payment. Thus, prolonging your first mortgage payment to Feb. 1st, 2021. (NOTE: mortgage payment interest is paid in arrears and is often rolled into the mortgage when closing one loan and refinancing to another.)
Historically low rates, check!
Property Taxes Paid, check!
Two months of no mortgage payments out of my pocket, check!
Happy Holidays, check check check!
If you’re looking to see how refinancing can impact cash in your pocket, call our expert lending and mortgage team in Houston today. The Blink team is always here to help, especially when times get tough.
