The tax service fee is a closing cost or charge that is paid when a mortgage becomes official and the sale of a home is completed. It is not actually a fee, but rather a lump sum down payment of a couple of months' worth of property taxes. This fee protects lenders by keeping property taxes current for the first few months after buying a home. Mortgage borrowers pay this fee to mortgage lenders to ensure that taxes on mortgaged property are paid on time. In simple terms, a tax service fee is paid to the company that manages the loan.
This company sets up an escrow account for the buyer and pays the buyer's taxes and home insurance with that account. The money for this fee comes from the borrower. Institutional and private mortgage lenders provide loans secured by real estate. When the landlord does not pay property taxes, the delinquent tax becomes a lien. Property tax liens take precedence over a mortgage loan.
To maintain its position as the priority lien holder, lenders must ensure that property taxes are paid on time. A real estate tax service contract assures the lender that property taxes are paid regularly during the life of the loan. To recommend the best solution to help lenders reduce mortgage portfolio risk, Info-Pro's on-site team analyzes the complexities of real estate tax tracking data. Our banking partners have loans in all 50 states, so we work with more than 26,000 tax agencies and understand the extremely wide variations of processes in all states, counties, municipalities and other tax authorities. This allows us to develop sophisticated solutions that simplify your real estate tax services. An example of this is the transfer tax, which is applied every time a real estate transaction occurs in certain jurisdictions.
Most mortgage agreements allow the lender to make tax payments on behalf of the borrower if they fail to do so. Inaccurate data and overdue property taxes can result in failed audits and property loss due to tax sales or foreclosures. When the tax bill is due, the real estate tax service will forward the payment on behalf of the borrower and send the lender a notice of the payment. This eliminates all complexity from the process, allowing payments to be sent directly to tax agencies. If John does not want to pay this fee, he can open an escrow account at Bank XYZ where he pays a small amount each month to pay off his property tax bill (which is then sent by the lender).
Once the lender has determined how much of a tax service fee is due and it has been paid by the borrower, both parties can focus more on their business relationship instead of worrying about local agencies collecting old property taxes. Before approving your mortgage, your lender will want to conduct an evaluation of your property's tax history and upcoming bills to protect their claim to your collateral. The company that manages your loan is usually an independent company that only ensures that taxes are paid on time. Info-Pro's solution eliminates any risk of human error by verifying all identification information associated with your mortgage loans and identifying any inaccurate information, from borrower names to property addresses.
