cancel
Showing results for 
Search instead for 
Did you mean: 

Escrow and first year taxes on a new construction home

tag
Anonymous
Not applicable

Escrow and first year taxes on a new construction home

Hi All,

 

I will be having a new home built beginning in August, and moving in for November of 2017. According to my towns tax assessor all 2018 taxes will be based on the status of the land as of 31/17, in other words a vacant lot. This amount is est to be $4000 for the year in town/county/school. The town/county taxes are due in January and the School in Sept. My taxes for 2019, when assessed as a fully built house will be $12k/year. 

 

Given these figures, what should I expect to pay at closing for escrowing taxes/HOI? And will my monthly mortgage payments once I move in be based on the est $12k/year, or the actual $4k/year for one year?  

 

It's also been brought to my attention there was a change to the STAR program and I will no longer be getting a monthly deductible for my STAR amount, rather come school tax time I will get a check for the full STAR amount for the current year. 

 

This is in upstate NY if that is important. Thank you. 

Message 1 of 4
3 REPLIES 3
Anonymous
Not applicable

Re: Escrow and first year taxes on a new construction home


@Anonymous wrote:

Hi All,

 

I will be having a new home built beginning in August, and moving in for November of 2017. According to my towns tax assessor all 2018 taxes will be based on the status of the land as of 31/17, in other words a vacant lot. This amount is est to be $4000 for the year in town/county/school. The town/county taxes are due in January and the School in Sept. My taxes for 2019, when assessed as a fully built house will be $12k/year. 

 

Given these figures, what should I expect to pay at closing for escrowing taxes/HOI? And will my monthly mortgage payments once I move in be based on the est $12k/year, or the actual $4k/year for one year?  

 

It's also been brought to my attention there was a change to the STAR program and I will no longer be getting a monthly deductible for my STAR amount, rather come school tax time I will get a check for the full STAR amount for the current year. 

 

This is in upstate NY if that is important. Thank you. 


I can only give you my experience, and I just closed about 2 weeks ago.

 

When I made loan app, and all through the entire build, multiple disclosure to sign (changing of sales price a couple of times), my estimated payment (and closing costs) on the papers was ALWAYS as at estimated IMPROVED rate for monthly escrow.

 

It wasnt until I got my final disclosure, and after the title company provided the tax cert, did the monthly payment adjust DOWN to the unimproved amount.  So basically for a period of time, until such that the property is appraised with the home, my payments will be lower.  I will say they escrowed 13 months at that rate though so that helps the bottom line for when it goes up. 

 

At closing there was a form i had to sign, and decide how I wanted to make up the shortage when it came due.  I chose the LUMP SUM, because I want to pay it in full and not have that AND the increase in payment to be all of a sudden something I have to pay monthly.  I budgeted all along at the higher payment so the extra $363 dollars per month is going to be put in account to pay the lump sum when it comes due.

 

Ive had friends close and not fully understand what they were doing, so when their mortgage payment went up $1000 they of course are strapped.  Budget higher, SAVE the extra each month, and pay in full when it comes due with that escrow account shortage.

 

PS i would collapse if my yearly taxes were 12000 a year!!!

Message 2 of 4
Anonymous
Not applicable

Re: Escrow and first year taxes on a new construction home

First let me say congrats on your new home! 

 

What is an "improved rate" for monthly escrow? And I guess also, what's an unimproved rate?

 

So just to make sure I have you right, at closing you had to escrow 13 months of taxes based off of an assessment of (in my case) $4,000, for a total of $4,333 (4000/12= 333 per month)?

 

My mortgage would be $2,800/month when my taxes and HOI are at their full, 2019 rate of $12K/year, OR in year one, my mortgage would be $2,133/month based off of a vacant lot land assssesment of $4,000.  Do I have that right? (1,000 a month minus 333 a month is the 667 difference). I could choose to pay the $4,333 at closing AND pay $2,800 a month and not be responsible for a LUMP SUM payment, OR...

 

If I went with the LUMP SUM option, I would pay $4,333 at closing still, but $2,133/month and I would be charged whatever shortage is in the escrow account for 2018, and my mortgage would go from $2,133/month to $2,800/month?

 

I guess my question is, what type of shortage would I be looking at in my escrow account? And why would I even have a shortage if I've been paying taxes on the lot as it was assessed?

 

My 2019 taxes would be based off of my 3/1/18 land (and now home) assessment. 

 

The schools were I'm moving are great, and the house would be 2.5X as expensive in other areas, but you're right, $12K a year in taxes is pretty brutal. And it's actually on the cheaper side for where we're looking!

Message 3 of 4
Anonymous
Not applicable

Re: Escrow and first year taxes on a new construction home


@Anonymous wrote:

First let me say congrats on your new home!  Thanks!!

 

What is an "improved rate" for monthly escrow? And I guess also, what's an unimproved rate?  unimproved = lot only  improved = house included.  For however long, not sure....my monthly escrow for taxes is at $156; thats on the unimproved amount/lot only.  But once the value is assessed on improved basis, thats probably going to be about $500.  So my monthly mortgage payment is WAY lower for however long...so I will just sock away the extra I had budgeted for, and later when its short I have the funds to pay a LUMP SUM.

 

So just to make sure I have you right, at closing you had to escrow 13 months of taxes based off of an assessment of (in my case) $4,000, for a total of $4,333 (4000/12= 333 per month)?  Yes.  Mine was just over $2K and the lender actually paid the bulk of it since they were paying $2K of my costs per our agreement.

 

My mortgage would be $2,800/month when my taxes and HOI are at their full, 2019 rate of $12K/year, OR in year one, my mortgage would be $2,133/month based off of a vacant lot land assssesment of $4,000.  Do I have that right? (1,000 a month minus 333 a month is the 667 difference). I could choose to pay the $4,333 at closing AND pay $2,800 a month and not be responsible for a LUMP SUM payment, OR...

 

If I went with the LUMP SUM option, I would pay $4,333 at closing still, but $2,133/month and I would be charged whatever shortage is in the escrow account for 2018, and my mortgage would go from $2,133/month to $2,800/month?  Lump sum as it pertains to my situation means that whenever the tax bill is received post assessement on improved, my escrow account might be short a few thousand dollars.  I chose to pay that when the lender lets me know I need to make up the difference somehow, not at closing since they dont know what the new appraised value will be by the county.  I know some folks might not have the funds or means to do that, but I do.  I would rather pay the bill when its due instead of rolling that shortage back into my payments at that time.

 

I guess my question is, what type of shortage would I be looking at in my escrow account? And why would I even have a shortage if I've been paying taxes on the lot as it was assessed?  If you are escrowing monthly at an improved rate,  you probably wont have a shortage. 

 

My 2019 taxes would be based off of my 3/1/18 land (and now home) assessment. 

 

The schools were I'm moving are great, and the house would be 2.5X as expensive in other areas, but you're right, $12K a year in taxes is pretty brutal. And it's actually on the cheaper side for where we're looking! 

 

I think the best thing here is to just see how it all shakes out for you and your lender will adjust accordingly prior to closing...or not.  You should be given options on how you choose to make up the shortage when your new home is assessed at a full value.  GOOD LUCK!! AND congrats!!!


 

Message 4 of 4
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.