Should You Roll Your Property Taxes Into Your Mortgage Payments, or Pay Them Yourself Separately?

The median U.S. property tax bill is $2,971 a year, according to research from The Motley Fool. But your property taxes may be lower or higher, depending on where you live and what your home is valued at.

When it comes to paying your property taxes, you have options. You could write out a check to your township or municipality directly on a predetermined basis, or you could allocate extra money every month in your mortgage payment for property tax purposes. The question is, which option is better?

When you pay your property taxes through your loan servicer

What many homeowners opt to do is have their mortgage loan servicers pay their property taxes on their behalf. Under this setup, you'll commonly send your loan servicer an amount of money every month that's larger than the payment for your mortgage's principal and interest alone. That extra money will go into an escrow account that your loan servicer will dip into as needed to pay your property taxes as they come due.

In many areas, property taxes are paid quarterly, though they're sometimes paid twice a year or even once a year. When you pay your property taxes through your loan servicer, you get to make a single monthly payment, and you don't have to worry about allocating funds for your property tax bills or having to remember to pay them.

When you pay your property taxes yourself

When you pay your own property taxes, you generally get to send your mortgage loan servicer a smaller amount of money each month. That's because you're simply covering your loan's principal and interest, and you aren't covering added costs.

Some people like the idea of doing things this way because they're not parting with as much money on a monthly basis. If you send your loan servicer a smaller check each month, you can keep the difference in your savings account and earn some interest on it until you need to write out a check to cover your property tax bill.

But if you're going to pay your property taxes yourself, you'll need to be really disciplined. If you're required to make a $1,500 property tax payment every quarter, you must make sure to allocate $500 a month in your budget for that expense. You may just find it easier to have your loan servicer handle those payments so you don't have to worry about being short.

What's the right call for you?

Property taxes are an unavoidable part of owning a home. And unfortunately, they have the potential to rise over time.

Rolling your property taxes into your mortgage payments might be the safer and more convenient way to cover that expense. But if you'd rather be in charge of those payments yourself, then you'll just need to budget carefully for them and mark the dates on your calendar for when your property taxes are due.

Some towns or municipalities will give you a modest grace period for paying property taxes late. But if you go beyond that, you'll generally accrue interest on overdue property taxes that can make that already large expense even more costly.