Are Property Taxes Included in Your Mortgage in Texas?
Yes — for most Texas homeowners with a mortgage, property taxes are included in your monthly mortgage payment through an escrow account. Your lender collects a portion of your estimated annual property taxes each month, holds it in escrow, and pays your county tax office on your behalf when taxes are due.
However, not all mortgages include property taxes. If you've paid off your home, waived escrow, or have certain loan types, you may be responsible for paying property taxes directly.
Can You Protest Property Taxes If You Pay Through Escrow?
Yes — you can and should protest your property taxes even if you pay through escrow. Whether your lender pays the tax bill or you do, the appraised value set by the county is the same. Protesting challenges that value, not how the bill gets paid.
Many homeowners assume that because they don't write a check to the county, they can't (or don't need to) protest. That's a common misconception. Here's what actually happens:
- You file a protest with your county appraisal district, just like any other homeowner. The process is identical whether you pay through escrow or directly.
- If the protest succeeds, the county lowers your appraised value and recalculates your tax bill.
- Your lender catches up at the next escrow analysis. Since your tax bill is now lower, your lender reduces your monthly escrow amount — lowering your mortgage payment.
- You may get a surplus refund. If your lender already collected more than needed based on the old (higher) tax bill, the excess is returned to you as an escrow surplus check, typically for amounts over $50.
How Much Can a Protest Save on Your Monthly Mortgage?
A successful protest doesn't just save you once — it reduces your monthly payment going forward:
| Appraised Value Reduction | Tax Rate | Annual Savings | Monthly Mortgage Reduction |
|---|---|---|---|
| $25,000 | 2.2% | $550 | ~$46/month |
| $50,000 | 2.2% | $1,100 | ~$92/month |
| $75,000 | 2.2% | $1,650 | ~$138/month |
These savings recur every year. If you protest annually, you prevent overassessment from compounding.
Do You Need to Notify Your Lender?
No. You don't need your lender's permission to protest, and you don't need to notify them. The county appraisal district sends updated tax information to all taxing entities. Your lender's next annual escrow analysis will automatically reflect the new, lower tax amount.
How Escrow Accounts Work
When you close on a home with a mortgage, your lender typically sets up an escrow account (also called an impound account). Here's how it works:
- Your lender estimates your annual property taxes based on the current assessed value and tax rates
- That amount is divided by 12 and added to your monthly mortgage payment
- The escrow portion is held in a separate account managed by your lender or loan servicer
- Your lender pays the county tax office directly, usually in December or January before the January 31 deadline
Your monthly mortgage payment is actually made up of four parts, often called PITI:
| Component | What It Covers |
|---|---|
| P — Principal | Pays down your loan balance |
| I — Interest | Cost of borrowing |
| T — Taxes | Property taxes (held in escrow) |
| I — Insurance | Homeowner's insurance (also escrowed) |
Example: If your annual property taxes are $6,000 and your homeowner's insurance is $2,400, your lender adds $700/month ($500 taxes + $200 insurance) to your principal and interest payment.
Annual Escrow Analysis
Once a year, your loan servicer performs an escrow analysis to compare what they collected against what they actually paid out. This is when your monthly payment can change:
- If there's a shortage (they collected too little): Your monthly payment increases, and you may owe a lump sum or have the shortage spread over 12 months
- If there's a surplus (they collected too much): You receive a refund check, typically for amounts over $50
Escrow analyses usually happen in the fall, and payment changes take effect 30-60 days later.
When Property Taxes Are NOT Included in Your Mortgage
There are several situations where you pay property taxes directly rather than through escrow:
You've Paid Off Your Mortgage
Once your mortgage is paid off, there's no lender to manage escrow. You're responsible for paying property taxes directly to your county tax office by the January 31 deadline each year. For payment methods, early payment discounts, and the full calendar, see: When Are Property Taxes Due in Texas?. Many homeowners set up automatic payments or calendar reminders to avoid missing the deadline.
You Waived Escrow
Some conventional loans allow you to waive the escrow requirement, meaning you pay property taxes and insurance on your own. This is more common with:
- Loans with a loan-to-value (LTV) ratio below 80% (at least 20% equity)
- Conventional loans (not FHA or VA)
- Borrowers with strong credit histories
Lenders may charge a small fee (typically 0.25% of the loan amount) to waive escrow. FHA and VA loans generally require escrow and don't allow waivers.
You Have a Non-Traditional Loan
Some private or portfolio loans, owner-financed properties, or commercial loans may not include escrow. Always confirm with your lender whether taxes are being escrowed.
How Property Tax Changes Affect Your Mortgage Payment
One of the most common surprises for Texas homeowners: your monthly mortgage payment can increase even with a fixed-rate mortgage. The "fixed" part only applies to principal and interest. Your escrow amount changes whenever your property taxes or insurance change.
Why Your Escrow Payment Increases
- Your appraised value went up: Higher appraised value = higher property taxes = higher escrow
- Tax rates increased: Local taxing entities raised their rates
- You lost an exemption: Homestead exemption was removed or not renewed
- Escrow shortage from prior year: Last year's estimate was too low
Timeline of Changes
Here's how a property tax increase flows through to your mortgage payment:
- January 1 — Your property's value is assessed for the new tax year
- April–May — You receive your Notice of Appraised Value from the county
- October — Your property tax bill is mailed based on the new value
- October–December — Your lender performs the annual escrow analysis
- January–March — Your new (higher) monthly payment takes effect
This lag means you may not feel the impact of a property tax increase for 6-12 months after the appraisal.
How to Lower the Property Tax Portion of Your Mortgage
Since escrow is based on your property tax bill, lowering your property taxes directly reduces your monthly mortgage payment. Here are two ways to do that:
1. File a Property Tax Protest
Protesting your property tax appraisal is the most effective way to lower the tax portion of your mortgage. If successful, your appraised value decreases, your tax bill drops, and your lender adjusts your escrow at the next annual analysis.
Example impact on your mortgage:
- Current appraised value: $450,000
- Successful protest reduces value to: $400,000
- Tax rate: 2.2%
- Annual tax savings: $1,100
- Monthly mortgage reduction: ~$92/month
That savings recurs every month and compounds if you protest annually.
2. Apply for Your Homestead Exemption
If you haven't filed for your homestead exemption, you're overpaying. The $140,000 school district exemption saves the average Texas homeowner $1,200–$1,500+ per year in school taxes alone, which translates to $100–$125/month off your mortgage payment.
The homestead exemption is free to file, takes effect at the next tax year, and renews automatically. You can apply up to two years retroactively if you missed the deadline.
Combine Both for Maximum Savings
The most effective strategy is to file for your homestead exemption and protest your appraised value every year. The exemption reduces your taxable value by a fixed amount, and a successful protest lowers the appraised value that everything is calculated from. Together, they can reduce your monthly mortgage payment by $100–$200 or more.
What Happens If You Don't Pay Property Taxes (No Escrow)
If your property taxes aren't escrowed and you fail to pay by January 31, serious consequences follow:
- February 1: 7% penalty + 1% interest
- Penalties increase monthly up to 18% by July
- July 1: Additional 20% collection fee may apply
- The county can foreclose on your home for unpaid taxes
Even if you have a mortgage with escrow, your lender may advance tax payments on your behalf and then increase your escrow to recover the cost — plus potentially charging you fees.
Bottom line: Whether or not your taxes are escrowed, they must be paid. The difference is who writes the check.
Frequently Asked Questions
Can I remove escrow from my mortgage?
It depends on your loan type and lender. Conventional loans with at least 20% equity often allow escrow waivers, though your lender may charge a fee. FHA and VA loans typically require escrow for the life of the loan. Contact your loan servicer to ask about their specific policy.
How do I know if my property taxes are escrowed?
Check your monthly mortgage statement. If you see a line item for "escrow," "taxes," or "T&I" (taxes and insurance), your taxes are being escrowed. You can also call your loan servicer or check your closing documents, which will specify whether an escrow account was established.
When does the county actually receive my tax payment?
If your taxes are escrowed, your lender typically pays the county tax office in November or December — well before the January 31 deadline. Some lenders pay as early as October when bills are first mailed. You can verify payment by checking your county tax assessor-collector's website with your property account number.
Why did my mortgage payment go up if I have a fixed rate?
A fixed-rate mortgage only fixes the principal and interest portion of your payment. The escrow portion (property taxes + insurance) changes annually based on actual costs. If your property taxes or insurance increased, your total monthly payment increases even though your interest rate hasn't changed.
What happens to my escrow if I successfully protest my property taxes?
After a successful protest, your property tax bill decreases. At your next annual escrow analysis (typically in the fall), your lender will recalculate and lower your monthly escrow amount — reducing your mortgage payment going forward. If there's a surplus from overpayment, you'll receive a refund check. The timeline: protest in spring/summer, county adjusts your value, lower tax bill goes out in October, lender picks up the change at the next escrow analysis, and your new lower payment kicks in within 30-60 days.
Can my lender stop me from protesting my property taxes?
No. Your lender has no say in whether you protest. Property tax protests are between you and the county appraisal district. Your lender only handles collecting and paying — they have no role in the valuation process. You don't need permission, and you don't need to notify them.
Lower Your Mortgage Payment by Protesting Your Property Taxes
If rising property taxes are pushing your monthly mortgage payment higher, a property tax protest can bring it back down. Ballard Property Tax Protest handles the entire process for Texas homeowners — filing, evidence, hearings — and you only pay if we reduce your value.
No reduction, no fee.