For most Texas homeowners with a mortgage, property taxes are included in the monthly payment. The servicer collects about one-twelfth of your estimated yearly tax bill each month, holds it in escrow and pays the county tax office before the January 31 deadline. Your taxes are not included if your loan has no escrow account, if you waived escrow, or if the home is paid off. Either way, the amount is set by your appraised value and local tax rates, so a successful protest lowers your mortgage payment.
Most Texas mortgage payments have four parts, known as PITI: principal, interest, taxes and insurance. Principal and interest repay the loan. Taxes and insurance go into an escrow account (sometimes called an impound account), which the servicer uses to pay your property tax bill and homeowners insurance premium when they come due.
| Part of your payment | What it pays | Can it change on a fixed-rate loan? |
|---|---|---|
| Principal | Pays down your loan balance | No |
| Interest | The cost of borrowing | No |
| Taxes (escrow) | County, city, school district and special district property taxes | Yes, every year |
| Insurance (escrow) | Homeowners, flood and wind/hail insurance, if required | Yes, at each renewal |
| Mortgage insurance | PMI or the FHA mortgage insurance premium, if your down payment was under 20% | It can be removed under certain conditions |
HOA dues are usually paid directly to the association, not through escrow.
Escrow accounts on most home loans are governed by federal rules under RESPA (Regulation X, 12 CFR §1024.17). The rules that matter most to Texas homeowners:
Monthly deposits are capped: one-twelfth of the estimated yearly taxes and insurance, plus a cushion of no more than one-sixth of the yearly total (about two months).
An escrow analysis is required every year: the servicer compares what it collected with what it paid and resets your monthly payment.
A surplus of $50 or more must be refunded within 30 days of the analysis, provided your payments are current. A smaller surplus can be refunded or credited to next year.
The servicer must pay on time: it has to pay escrowed bills by the deadline to avoid penalties, as long as your payments are no more than 30 days overdue.
| Estimated yearly property taxes | $7,200 |
| Yearly homeowners insurance premium | $3,000 |
| Yearly escrow total ($7,200 + $3,000) | $10,200 |
| Monthly escrow added to principal and interest ($10,200 ÷ 12) | $850/mo |
| Largest cushion the servicer may hold (one-sixth of $10,200) | $1,700 |
Illustrative figures only. Your amounts depend on your appraised value, exemptions, local tax rates and insurance premium. You can estimate your tax bill with our property tax calculator.
| Your situation | Taxes in the mortgage payment? | What to know |
|---|---|---|
| FHA, VA or USDA loan | Yes | These loans generally require escrow for the life of the loan. |
| Conventional loan with less than 20% down | Usually | Lenders typically require escrow until you build equity. |
| Conventional loan with an escrow waiver | No | You pay the tax office directly by January 31. Some lenders charge a fee or a higher rate for the waiver. |
| Home paid off | No | The servicer closes the escrow account and refunds any balance. Taxes become your responsibility. |
| Seller financing or a private or portfolio loan | Depends | Read your note and deed of trust. Many have no escrow but still require you to show proof of payment. |
| Commercial or investment loan | Depends | Tax escrow is common, but the loan agreement decides. See the commercial section. |
If you pay directly, everything depends on the deadline. Unpaid Texas taxes become delinquent on February 1, with penalties and interest that grow every month and an extra collection fee of up to 20% that can attach later in the year. Our Texas property tax penalty guide shows the month-by-month cost, and Texas property tax deadlines lists every key date.
Escrowed taxes can still go unpaid. Servicers sometimes pay the wrong account, pay late after a loan transfer, or miss a supplemental bill. Penalties land on your property, not the servicer's, so check your county tax office's website each February that the bill shows as paid.
"Fixed rate" applies only to principal and interest. The escrow portion moves with the bills it pays, and in Texas, with no state income tax, local property taxes are among the highest in the country. (Here is why Texas property taxes are so high.) The usual causes of an escrow increase:
For more on what is behind a higher tax bill, see why your property taxes increased.
A higher appraisal in spring usually reaches your mortgage payment the following year. Here is how the Texas tax year lines up with your escrow account:
The appraisal district values your property as of January 1. April 30 is the usual deadline to apply for exemptions for the current year.
Your notice arrives. The deadline to protest is generally May 15 or 30 days after the notice is delivered, whichever is later. This is the single best chance to lower next year's escrow.
Informal meetings and appraisal review board hearings take place. Appraisal rolls are generally certified by July 25.
Local taxing units set their rates for the year.
Tax bills are mailed, usually in October. Your servicer receives the bill or pulls it from the tax office.
Escrowed taxes are paid from your account. Payment is due by January 31. Your escrow analysis then resets your monthly payment for the coming year.
Your servicer can't negotiate your property taxes. It just pays the bill it receives. Only you can change that bill, and there are two main ways to do it.
A protest challenges the value the appraisal district placed on your property. The process is the same whether your lender pays the bill or you do: you don't need the lender's permission and you don't need to tell them. Start with how to protest property taxes and win in Texas, then see how to build an evidence packet and what happens after a protest. Values reset every year, so you can protest every year.
| Appraised value on notice | $425,000 |
| Value after a successful protest | $385,000 |
| Combined local tax rate (assumed) | 2.10% |
| Yearly tax savings ($40,000 × 2.10%) | $840 |
| Lower escrow payment after the next analysis | ≈ $70/mo |
Illustrative only. For a homestead, the 10% cap and your exemptions also affect the result. Savings depend on the reduction obtained and your local rates.
The general homestead exemption removes $140,000 of value from school district taxes, and homeowners 65 or older or disabled receive an additional school exemption. If you bought your home and never filed, you may be able to apply for a retroactive homestead exemption for up to two prior years and get a refund. See every Texas property tax exemption, over-65 exemptions, exemptions for disabled homeowners and veterans exemptions.
If a refund arrives after a protest or exemption, it may go to whoever paid the tax, which could be your servicer. Ask your servicer to credit it to your escrow account, and make sure your next escrow analysis uses the corrected bill.
If you can't keep up with a high tax bill, a property tax loan can look easy. But it can carry high interest and fees, and the lender takes a lien on your property. Compare the options in property tax loan vs. protest first. Homeowners 65 or older or disabled may also qualify to defer homestead taxes, but review your deed of trust first: most mortgages require taxes to be paid when due.
Commercial loans handle taxes in different ways. Many lenders require a monthly tax escrow, while others accept proof of payment before January 31. In either case, the loan agreement usually makes unpaid taxes a default, because a Texas tax lien outranks the mortgage. For leased property:
See our commercial property tax protest services for how we handle these properties.
Usually, yes. Most Texas home loans collect property taxes monthly through an escrow account, and the loan servicer pays the county tax office when the bill comes due. FHA, VA and USDA loans require escrow, and most conventional loans with less than 20% down do too. If your loan has no escrow account, or your home is paid off, you pay the tax office directly.
Check your monthly mortgage statement for an escrow, taxes or "T&I" line, or look at the Closing Disclosure from your purchase, which shows whether an escrow account was set up. You can also look up your account on your county tax assessor-collector's website: escrowed accounts usually show the payment coming from your mortgage company.
A fixed rate locks only principal and interest. The escrow portion changes every year with your property taxes and homeowners insurance. If your appraised value, tax rates or insurance premium went up, or your servicer had an escrow shortage last year, your total payment rises even though your rate did not.
Yes. The right to protest belongs to the property owner, not the lender. You do not need your lender's permission or to notify them. If the protest lowers your value, your tax bill drops and your servicer lowers your escrow payment at its next annual analysis.
Texas tax bills generally go out in October and are due by January 31. Servicers typically pay between November and January. Check your county tax office's website before February 1 to confirm the payment posted, because penalties and interest begin on unpaid bills on February 1, even if the mistake was your servicer's.
Sometimes. Many conventional loans let you waive escrow once you have at least 20% equity and a clean payment history, and some lenders charge a fee or a slightly higher rate for it. FHA, USDA and VA loans generally require escrow. Ask your servicer about its escrow waiver policy.
Your lower tax bill feeds into the next escrow analysis. Your servicer recalculates your monthly payment, and if the account ends the year with a surplus of $50 or more, federal escrow rules require the servicer to refund it to you within 30 days of the analysis, provided your payments are current.
Yes. Once the loan is paid off, the servicer closes the escrow account and refunds any balance, and you pay the county tax office directly. In Texas the bill is due by January 31. Some taxing units allow split payments, and homeowners 65 or older, disabled homeowners and some veterans can pay homestead taxes in four installments.
Your servicer pays whatever bill the county sends. We challenge the value behind that bill. Talk to a Texas property tax attorney about your property tax protest.
Start Your ProtestThis article is general information about Texas property taxes and mortgage escrow, not legal advice for your situation. Loan terms vary, so check your note, deed of trust and servicer's escrow statement. For advice on your property, contact our firm.
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