When you are preparing for closing on your brand new home, there are a few things to keep in mind as you evaluate the payment estimate provided by your Lender. In most cases, the recorded property tax for the home is based on unimproved property (the land only) because the home is new and the improved property (land and house) has yet to be assessed by the county. The scenario results in the property tax, on record, to be especially low and forces the Lender to estimate what your property tax might be.
At the time of sale, in Florida, all homes are assessed by the County Tax Appraiser. This results in the final tax bill, for the year of purchase, to reflect the tax due on improved property (house and land) for the entire year. And although the Builder will have credited you, the buyer, for property tax due from January 1st to your closing date, they may only credit you on the unimproved tax rate. This will surely result in a shortage in your Escrow Account balance.
When there is a shortage in your Escrow Account, the Lender will be forced to annualize the shortage and add that amount to your future monthly payments. This increase in your monthly mortgage payment can be devastating. To avoid a shortage in your Escrow Account it is imperative that you take a more realistic approach to your estimated payment and opt for the Lender to estimate your monthly escrow payment at the full improved property rate and WITHOUT a potential Homestead Exemption (even if you intend to file in January). An alternative option is to anticipate a shortage and put one hundred ($100) dollars per month into a savings account to be used if a shortage does exist!
Timing for your Homestead Exemption
When you purchase a home in Florida and that home is your primary residence, you qualify for a Homestead Exemption. You must own your home before January 1st of the year in which you file and you must file no later than 1 March of that year (in Hillsborough County). So, for example, if you purchase your home in July, you would file your Homestead Exemption in January of the next year. This means, you will pay taxes in the year of purchase on a tax rate that DOES NOT include a homestead exemption! It is imperative that your lender set up your Escrow payments to reflect a NON-HOMESTEAD IMPROVED PROPERTY tax estimate. Click here to learn more about the Hillsborough County Homestead Exemption and other available exemptions.
When you do file your Homestead Exemption in January, you must wait for the County Tax Appraiser to issue a Notice of Property Assessment called a TRIM NOTICE and then send this document to your Mortgage Lender in order for them to update your escrow account based on the new tax estimate which includes a Homestead Exemption. Property owners can expect the TRIM NOTICE by 31 August. This means, you will have to continue to pay the higher property tax (that without a homestead exemption) until you can provide the TRIM Notice (also called a Mortgage Letter) to your lender so that they may update the file and update your payment. The Homestead Exemption will apply to the entire year, so you can expect a refund from your Escrow Account for the excess you paid before the adjustment is made to your escrow account.
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