NH property tax bills and your escrow: why your payment changes

Why did my mortgage payment go up?

On most loans your monthly payment has two parts. Principal and interest stay the same on a fixed-rate loan. The escrow part pays your property taxes and homeowners insurance, and it changes whenever those bills change.

Once a year your loan servicer reviews the escrow accountEscrow account An account your loan servicer uses to collect and pay your property taxes and homeowners insurance as part of your monthly payment. See the full glossary×. If your taxes or insurance went up, the review raises your escrow payment to cover the higher bills ahead, and it may add a little more to make up money the account ran short on. That second piece is called a shortage, and it's why a payment can jump more than the tax increase alone.

How do New Hampshire towns bill property taxes?

New Hampshire's property tax year runs from April 1 to March 31, and property is assessed as of April 1. Many towns bill twice a year:

• The first bill, often mailed in late spring, is an estimate. Under state law it's generally based on half of the prior year's taxes, because the new rate isn't set yet.
• The final bill, usually late in the year, uses the new tax rate the NH Department of Revenue Administration sets in the fall. It covers the full year's tax minus what the first bill collected.

Some towns bill quarterly instead, and due dates vary, so check your town's tax collector page. Either way, a higher new rate shows up on the final bill, after your servicer has already set your escrow payment for the year. That timing is why many New Hampshire homeowners see their payment change in the months after the fall rate setting. The property tax guide explains how the rate itself is set.

What happens at the yearly escrow review?

Federal rules (RESPA's Regulation X) require your servicer to review the escrow account at least once a year. The servicer projects the next 12 months of tax and insurance bills, sets the monthly escrow amount to cover them, and compares the projection with what's in the account.

The servicer can keep a cushion in the account for surprises, but no more than one-sixth of the year's expected bills, which is about two months of escrow payments. You get an annual escrow statement within 30 days of the end of the escrow year showing what was paid in, what was paid out and your new payment.

What is an escrow shortage, and how do I pay it?

A shortage means the account won't have enough to pay the coming year's bills and keep the allowed cushion. It usually follows a tax or insurance increase the old payment didn't plan for.

• If the shortage is one month's escrow payment or more, the servicer can spread it over at least 12 monthly payments. It can't require you to repay it all at once.
• If it's smaller than one month's payment, the servicer may ignore it, ask you to repay it within 30 days or spread it over at least 12 months.

Many servicers also let you pay a shortage in one lump sum if you'd rather. That removes the shortage part of the increase, but the higher ongoing tax or insurance amount stays in your payment.

Do I get money back if there's extra in escrow?

Yes, in many cases. If the review finds a surplus of $50 or more and your payments are current, the servicer has to refund it within 30 days of the review. A smaller surplus can be refunded or credited toward next year's payments.

A surplus is common after a refinance or a successful abatement, or when a town's rate goes down.

Why can escrow come up short in my first year after buying?

Your first escrow payment is based on the tax information available at closing, which may not match your own bill once it arrives. A few New Hampshire situations cause most first-year surprises:

• The seller's credits and exemptions end with the sale. A veterans' credit or elderly exemption belongs to the owner, not the house. If you qualify for one yourself, file Form PA-29 with the town by April 15 of the tax year.
• New construction. A home that was unfinished on April 1 may have been assessed as land or a partly built house. The next assessment counts the finished home.
• A new tax rate or a town revaluation. A fall rate increase or a revaluation can change the bill your first escrow payment was based on.

Before you buy, use the property tax calculator or the town's page to estimate the tax on the price you're paying, not only the seller's current bill. Tom includes the town's tax rate in the payment estimates he prepares.

How do I check my escrow statement?

1. Compare the tax amounts with your actual bills from the town. Most towns post bills or balances online.
2. Check your insurance renewal. A higher premium is the other common cause of an increase, and it may be worth shopping your homeowners policy.
3. Look for a missed or doubled payment. If a bill was paid late, twice or not at all, call your servicer and ask for a corrected analysis.
4. Question the assessment, not just the payment. If you think your assessed valueAssessed value The value a New Hampshire town assigns to a property for tax purposes. Your property tax is based on it, not on the purchase price. See the full glossary× is too high, the town's abatement deadline is generally March 1 after the year's final tax bill.

Can I pay my property taxes myself instead?

Sometimes. FHA loans require an escrow account. Many conventional loans allow you to waive escrow once you have enough equity, though a lender may charge for the waiver or price the loan differently. If you waive it, you pay each tax bill and insurance premium yourself, on time, and the lender can bring escrow back if a bill goes unpaid.

Escrow spreads a large December tax bill into monthly payments, which is why most homeowners keep it. If you're weighing a waiver as part of a refinance, Tom can show you how each option would look across Elite Mortgage Group's lenders.