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What happens to your mortgage payment when the taxes change? We’ll look at my daughter’s changes over the last 18 months. In 2008 when the Indianapolis property tax C-bill came out ( the final bill for 2006), it was much less than the normal tax bill. Since taxes were behind, my daughters lender assumed her taxes had changed and sent her a check for the overage in her reserve account.

Mortgage companies are only allowed to keep a maximum amount in reserves.

When the next tax bill came out, the lender paid the taxes, but there wasn’t enough in her account, so her payment increased to $1240.00. She paid that until last month when the reconciliation bill came out. The computer which tracks such things calculates her payment again decides she has too much in reserves and kicks back a check.

Now she has two months reserves on a lower amount. The bank is taking an average of $700.00 every six months out; except her taxes are $1200.00 semi-annually. By September, when her taxes are due she will have about $520.00 in reserves. Her taxes will be $1200.00 in September and another $1200.00 in November. Her account will be $4100.00 in arrears by the end of the year.

The mortgage company will recalculate and she will be given the opportunity to make up the difference or add it to her monthly payment. In addition to the $4100.00, the bank will add another $500.00 semi-annually or $1000.00 to make up the difference between what they are currently taking in reserves and what the actual tax is.

Remember the actual tax is $1200.00, but the bank is only collecting on the amount of the most recent tax bill; $700.00. $5100.00 divided by 12 months = $430.00 a month, which means her $1100.00 payment will now be $1530.00 for one year.

This is a huge difference and will be a difficult task for many homeowners in the coming months. I would love to hear from homeowners whose tax amount have affected their housing payment and their lives.