Are Property Taxes Included in Mortgage Payments?

TL;DR: Are Property Taxes Included in Your Mortgage Payment​

• In many cases, yes — your property taxes are included in your monthly mortgage payment via an escrow account, but it depends on your loan type and lender.
• Escrow accounts are set up by lenders to collect and manage property tax and insurance payments, helping you avoid large lump-sum bills.
• FHA, VA, and USDA loans require escrow, while some conventional loans allow you to waive it with a 20%+ down payment.
• If your escrow is short, your mortgage payment may increase — and if you’re behind on taxes, it could lead to liens or foreclosure.
• Fantastic Homes buys Illinois homes as-is, even with unpaid taxes or liens, offering cash offers and fast closings with no fees or repairs required.

If you’re a homeowner with a mortgage, there’s a good chance your property taxes are included in the mortgage payment through what’s called an escrow account.

But not every loan includes them automatically, and not every homeowner pays the same way.

That’s why understanding the answer to the question are property taxes included in mortgage payments is so important—especially if you’re facing financial challenges or considering selling your home.

For Illinois homeowners looking to simplify their situation or sell fast, companies like Fantastic Homes—one of the top cash home buyers in Illinois—offer a better alternative: no escrow, no agent fees, and no repairs required.

Understanding the Basics of a Mortgage Payment

What Is PITI? Breaking Down the Components

Mortgage payments are made up of several parts, often referred to as PITI: Principal, Interest, Taxes, and Insurance.

Principal pays down your loan balance. Interest is the cost of borrowing. Taxes typically refer to property taxes. Insurance includes homeowner’s coverage and possibly private mortgage insurance (PMI).

Together, these components determine your monthly payment amount—and whether or not your property taxes are included often depends on how your lender structures your mortgage.

Many first-time buyers don’t realize how important it is to ask early on: Are property taxes included in mortgage​ payments, or will they need to budget separately?

The Role of Property Taxes in Homeownership

Property taxes are recurring expenses that fund local services like schools, emergency services, and road maintenance.

These taxes are non-negotiable for homeowners and are calculated based on the value of your property. If you’re unable to pay them, you could face late fees, liens, or even foreclosure—which is why many lenders prefer to handle them through an escrow account.

How Property Taxes Are Calculated

Your local government assesses the value of your home annually or semi-annually and applies a local tax rate (also called a mill rate) to determine your property tax bill. The amount you owe is calculated using a simple formula: assessed value × tax rate = property tax.

This calculation varies significantly from one region to another. In places like Cook County, Illinois, assessments occur every three years and are based on a complex, market-driven model.

That’s why it’s common to wonder, are Cook County property taxes included in mortgage payments​? The answer depends on your loan setup and whether an escrow account is in place.

Also read: Mortgage Assumption vs. Refinance After Divorce Simplified

What Is a Mortgage Escrow Account?

If you’ve ever wondered, “Are property taxes included in mortgage payments,” it’s usually because your lender sets up an escrow account to handle them for you.

How Escrow Accounts Work

A mortgage escrow account is set up by your lender to collect monthly installments toward your annual property taxes and homeowner’s insurance.

Each month, your mortgage payment includes one-twelfth of your estimated yearly tax bill. When your taxes are due, the lender uses the funds in escrow to pay them on your behalf, helping you avoid large lump-sum payments.

For anyone trying to plan their housing costs, understanding are property taxes included in mortgage​ payments can make or break a monthly budget.

Why Lenders Use Escrow for Taxes and Insurance

Lenders want to protect their investment.

If you fail to pay property taxes, your local government can place a lien on the home—which takes priority over the mortgage.

Escrow accounts help lenders ensure taxes and insurance premiums are paid on time, reducing their risk and helping you avoid default.

Escrow vs. Closing Escrow: What’s the Difference?

This is where things get confusing.

If you’ve ever asked yourself, “Are property taxes included in mortgage​ payments,” it’s likely because you saw them listed as part of your closing costs or monthly bill.

Closing escrow is a one-time account used when you purchase the home—it holds funds until all conditions of the sale are met.

A mortgage escrow account is ongoing and used to manage your property-related bills over time.

If you’re working with a cash buyer like Fantastic Homes, they may still use a closing escrow to facilitate the transaction, but there’s no monthly mortgage escrow account involved.

When Are My Property Taxes Included In My Mortgage Payment?

It’s especially important to ask your lender upfront: Are property taxes included in mortgage payments? The answer directly affects how your escrow account is set up and what your total monthly payment will be.

How Lenders Estimate and Allocate Tax Payments

Lenders estimate your annual property tax bill based on your home’s value and local tax rates.

They divide that amount by 12 and add it to your monthly mortgage payment.

These estimates aren’t always exact, so your escrow may end up over- or under-funded, leading to adjustments later.

FHA vs. Conventional Loans: What’s Required?

FHA, VA, and USDA loans require escrow accounts.

With conventional loans, escrow is usually required unless you make a 20% or greater down payment.

That’s why the question, “Are property taxes included in the mortgage payment​” has different answers depending on your loan type.

Annual Escrow Analysis and Adjustments

Each year, your lender performs an escrow analysis to compare the actual taxes and insurance paid versus the amount collected.

If your property taxes increased or your escrow was underfunded, your lender will raise your monthly payment. If you overpaid, you might get a refund or see a temporary payment reduction.

Are Property Taxes Included in Mortgage Payment? Not Always—Here’s When They’re Not

Paying Property Taxes Directly to the Tax Authority

If you don’t have an escrow account, it’s your responsibility to track and pay property taxes directly to your local government—typically once or twice a year.

If you’re not budgeting carefully, this can lead to missed payments and penalties.

Who Qualifies to Waive Escrow?

To waive escrow, you usually need a strong credit profile, a conventional loan, and a down payment of 20% or more.

Your lender must approve the waiver, and they’re not obligated to grant it even if you meet the criteria.

Pros and Cons of Managing Your Own Tax Payments

Pro: You have full control and can potentially earn interest on money saved before paying taxes.

Con: You need discipline to set aside the funds—and if you’re in a financially stressful situation, it’s easy to fall behind.

This is a major reason homeowners in distress consider selling to Fantastic Homes, especially if they’ve already missed payments.

Pros and Cons of Including Property Taxes in a Mortgage

Benefits of Bundling Taxes With Your Mortgage

It simplifies your finances, helps you avoid late fees, and makes budgeting more predictable.

For many homeowners, especially those juggling life changes like divorce, inheritance, or job loss, this convenience is invaluable.

Potential Drawbacks of Using an Escrow Account

Escrow accounts can result in higher upfront costs at closing and don’t earn interest. Additionally, miscalculations can lead to surprises when your mortgage payment is adjusted.

Should You Opt In or Out? Key Considerations

Ask yourself: Do I have the discipline and financial cushion to handle large tax bills on my own? 

If not, escrow is the safer route. But if you’re in over your head with taxes or mortgage issues, selling your home for cash may be a smarter option.

Fantastic Homes evaluates your property based on the highest off-market value and provides a competitive, no-obligation cash offer within 24 hours—so you can close in as little as seven days. Simply fill out this online form to get your free cash offer!

Can Property Taxes Cause Your Mortgage Payment to Increase?

How Tax Rate Changes Affect Escrow Contributions

Yes, they can. If your local government increases the tax rate or your home’s assessed value goes up, your lender will increase your monthly escrow contributions accordingly.

That means a higher mortgage bill, even if you have a fixed-rate loan.

Unexpected increases often prompt homeowners to ask, are property taxes included in mortgage​ payments, or is something else causing the change?

Dealing With Escrow Shortages and Surpluses

Shortages (when your escrow account doesn’t have enough to cover property taxes or insurance) lead to catch-up payments or higher future installments.

Surpluses (when your lender collected more than needed) result in refunds.

If your financial situation is tight, these fluctuations can cause serious stress—especially for homeowners already behind on payments or taxes.

What Happens to Property Tax Payments After Your Mortgage Is Paid Off?

Transitioning to Direct Payments

Once your mortgage is paid off, your lender is no longer involved. You’ll receive your tax bills directly from your county and must pay them manually.

Setting Up Reminders and Budgeting Without Escrow

Use calendar alerts, automated savings accounts, or budgeting tools to stay on track.

If you’re not confident managing this on your own, consider seeking help—or exploring options like selling to Fantastic Homes if the burden becomes too much.

Fantastic Homes doesn’t charge any fees, which means the money you make from the home sale is the money you walk away with.

Common Situations Where Escrow and Property Taxes Matter Most

Foreclosure, Tax Delinquency, and Escrow Defaults

Falling behind on property taxes is one of the most common causes of foreclosure. Escrow accounts are designed to prevent this by ensuring taxes are paid on time.

However, if your escrow is underfunded—or if you’ve missed several mortgage payments—you may already be in default.

Tax delinquency can lead to liens, which must be resolved before a traditional sale. With a cash buyer like Fantastic Homes, those liens can be paid off at closing—no hassle, no agent, and no out-of-pocket costs for you.

Probate and Inherited Homes With Unpaid Taxes

Inherited homes often come with hidden baggage: back taxes, unclear titles, or overdue escrow balances.

Many heirs are surprised to learn that the property has unpaid bills, especially if the home was vacant or the original owner passed away unexpectedly.

Selling a home in probate with tax issues can be time-consuming and emotionally draining. Fantastic Homes specializes in buying inherited homes as-is, handling taxes, liens, and probate complexities so you don’t have to.

Vacant or Run-Down Properties With Escrow-Related Risks

Vacant homes or neglected properties are more likely to slip through the cracks when it comes to tax payments and escrow management.

These properties may have escalating tax bills, insurance lapses, or escrow shortages that the homeowner can’t afford to fix.

If your property needs repairs and you’re facing a financial shortfall, Fantastic Homes can help by buying your house for cash in its current condition—no repairs, no inspections, and no closing delays.

Also read: What Does It Mean To Sell A House As Is? Here’s How It Works

What Illinois Homeowners Need to Know About Property Taxes and Mortgages

Illinois homeowners often wonder, especially with our high tax rates, are property taxes included in mortgage​ payments by default or handled separately?

How Property Taxes Work in Illinois

Illinois has some of the highest property tax rates in the country, often over 2% of a home’s value. In Cook County, homes are reassessed every three years using a complex formula that includes market value, classification, and exemptions.

These reassessments can lead to sudden tax increases that impact your monthly costs.

Navigating Escrow, Tax Liens, and Selling Options

If your escrow account falls short due to rising taxes, your lender may increase your monthly mortgage payment to cover the difference.

For homeowners already struggling, this can lead to missed payments and tax liens, which complicate a traditional sale.

In these situations, many consider downsizing or selling as-is to a cash home buyer to avoid further financial strain.

Why Selling As-Is Might Be a Smart Financial Move

For homeowners in foreclosure, probate, or dealing with unpaid taxes, selling your home as-is can provide fast relief.

A cash buyer like Fantastic Homes can close quickly, pay off liens, and buy your home with no repairs, fees, or escrow hassles—helping you move on with peace of mind.

FAQs: Are Property Taxes Included in Mortgage Payments?

How Do I Know If Property Taxes Are Included in My Mortgage Payment?

Check your mortgage statement or ask your loan servicer directly. The escrow breakdown will be listed.

Why Did My Mortgage Go Up If I Have a Fixed Rate?

Your fixed rate only applies to principal and interest. Escrow adjustments can increase your total monthly payment if property taxes rise.

What Happens If I Miss a Property Tax Payment?

You may incur penalties or have a lien placed on your home. In severe cases, you could face foreclosure.

Can I Sell a House With Unpaid Property Taxes in Illinois?

Absolutely. Fantastic Homes specializes in buying homes as-is—including those with tax delinquencies or liens.

Do Escrow Accounts Still Matter If I’m Selling My Home for Cash?

Not in the same way. There’s no mortgage involved, so no mortgage escrow account is needed. Fantastic Homes may use a closing escrow to handle the transaction, but sellers don’t need to worry about taxes or paperwork—we take care of it all.

How Fantastic Homes Helps Illinois Homeowners in Tough Situations

We Buy Homes With Tax Liens, As-Is, With No Repairs Needed

You don’t need to catch up on property taxes or make any repairs. We’ll take care of liens and work directly with the title company to resolve everything at closing.

No Commissions, No Closing Costs, No Stress

Skip the agents, fees, and out-of-pocket costs. Whether your home is vacant, inherited, or mid-foreclosure, we’ll buy it exactly as it is.

Sell Fast, Get a Fair All-Cash Offer

We provide competitive cash offers and can close in just days—not months. No showings. No delays. Just a straightforward, stress-free solution.

Request Your Free No-Obligation Cash Offer Today

Facing Foreclosure, Probate, or Tax Debt? We’re Here to Help

Contact FantasticHomes.com for a Fast and Hassle-Free Sale

Don’t let tax debt or escrow stress hold you back. Fantastic Homes offers fast, fair cash offers so you can move forward with peace of mind.

Related: Why Are Property Taxes So High In Illinois?