Current Home Lending Info Blog for Southern Nevada

Though the above comment might be a little harsh it, in one form or another, is something I have run across my clients asking me, or me forcing out of them because it was on their mind, time and time again.

If you are a first time homebuyer, please keep reading, this is a must for you. If not, I would suggest you still continue so that investors, second home and vacation home buyers, and people whom are moving up from a starter home to a larger home can hear this valuable information about taxes and insurance, and the best way to implement them into your life. Some of this may be new to you, or parts of this may have never been explained properly by the previous loan officer who did your loan...So here we go...

Whenever you purchase a home, even if you buy it with cash all up front, you will still have AT LEAST two bills that you must pay every year on your home. You will always have Property Taxes, and you will always have Homeowner's Insurance. Now, if you live in a condo or a townhome, the homeowner's insurance may be included in your Homeowner's Association Dues since you have adjoining walls with other homeowners. Due to the adjoining walls, Condo and townhome developers want to make sure that if you or your neighbor have any problems with leaks, fires, or other hazards, that it will be included in what they call a "blanket policy" which will protect each homeowner that is connected to your home. So, if you have a homeowner's association fee that includes the hazard insurance as part of its requirements, you will also have the taxes as well, which will give you the two bills for your home.  But, let's get back to Taxes.

In the state of Nevada, you have property taxes if you own any property anywhere in Clark County (of course they have taxes in all counties, we are just using Clark County for our own Demonstration). The Assessor's Office of Clark County in Nevada is the one who we are most concerned with here. This will cover most of your major areas including Henderson, Las Vegas, N. Las Vegas and Summerlin as well. The Assessor's Office has a responsibility each year to reassess each home in Clark County, and try to give it a fair value based on what they determine the value of your property is based on the size of the land plus the value of the size and age of the home.

There is no getting around this fact. The state WILL make sure they get paid...They have always been good at that ! haha... Now, the other bill that you will get each month, which I briefly touched on earlier, is you homeowner's insurance policy. This is also a mandatory bill, unless you are in a situation where you own the home free and clear and you are not under the rules of a Homeowner's association where they state that you must carry hazard insurance at all times or it may result in a fine. This is one of those bills that, even if you were in that situation where it is not required of you to have, it is definitely worth it to ALWAYS keep it active and paid on time. This is the only bill that you will pay that will make sure in the event anything happens to your home, the insurance company will come in and resolve the issues.  From small flood, to complete rebuild, that is what you pay your homeowner's insurance for, and they do what they can to fix any problems that fall in their jurisdiction.

So, now that we have established that these are two bills that you will pay for the rest of your life, let's talk about the options of payment that come along with them. First, if your home is paid off, You will most likely pay one check for each quarter that your taxes are due.  In Clark  County, the fiscal year for tax payments begins in August.  Typically the tax payments are broken up into four equal payments, with the subsequent three other tax payments being sent on October 1st, January 1st, and March 1st and then starts all over again in August.  The insurance yearly dues are required on the anniversary of the purchase date of your home.  Some people choose to make these payments on their own, instead of having the mortgage company make the payments for you.

If you have the mortgage company make the payments for you, you definitely get to enjoy some of the perks that come along with that.   First, instead of having to make three months worth of tax payments each quarter and remember to save up a years worth of hazard insurance every year, your mortgage companies split up the cost of your taxes and your Hazard Insurance into a monthly cost that gets added to your normal mortgage payment over a 12 month period, and they take the portion of the taxes and insurance cost, and they put that into a separate bank account for you along with other borrowers taxes and insurance payments that they make, and they make sure that your tax payments and your insurance payments get made on time so you do not have to worry about mailing the payments out or having enough money to cover the costs.

Now, while this does seem like such a great service that banks decide to give you, in most cases it is mandatory that you do this.  In fact, if it is not mandatory you will typically get a .25% hit to your interest rate if you do not let them do this.  The reason for this is because you are making payments each month to build up to what you need to pay off your taxes and insurance each year.  Although they collect on a monthly basis, they only pay the county and your insurance agent every quarter or every year.  By putting your money into a separate account where they gain interest on your money, and add the thousand of other borrowers who are also doing the same thing, the mortgage companies make quite a bit of money off of making your life easier by paying your bill for you.

I advise most people to go ahead and have the bank collect your monthly portion of your taxes and insurance because when you break down the numbers in the long run, you really do not save much by paying these items yourself if you are responsible.  The only way it makes sense is if you have a number of loans that you are collecting on, like the actual banks that hold your loans.

So, in short, have you mortgage company "escrow" your taxes and insurance.  It is two less bills that you have to worry about, and  you will typically get a price cut in your interest rate.

HAPPY HOUSE HUNTING!!!

Best Regards,

David J. Schwartz
Mortgage Planner/ Sales Manager
702.370.2116
David@HomeLoansOfNevada.Com