How to Save Money by Paying Your Own Property Taxes
Most homeowners let their mortgage company handle property taxes through an escrow account. It's convenient—but it's also leaving money on the table. By paying your property taxes yourself and keeping that money in a high-yield savings account until the last possible moment, you can earn hundreds of dollars in interest every year. Here's how it works.
How Escrow Accounts Work (And Why They Cost You)
When you have a mortgage, your lender typically collects a portion of your annual property taxes each month and holds it in an escrow account. When your tax bill comes due, they pay it on your behalf. Sounds convenient, right?
The problem is that escrow accounts earn little to no interest. Your money sits there for months doing nothing. Meanwhile, high-yield savings accounts are offering 3.5% to 5% APY. That's free money you're missing out on.
The Strategy: Keep Your Money Longer
The strategy is simple: if your lender allows it, opt out of escrow for property taxes. Instead of sending extra money with each mortgage payment, deposit that same amount into a high-yield savings account each month. Then, pay your property taxes yourself—at the last possible moment.
The key insight is that property taxes are typically collected in two installments per year, and the real deadline is often later than the date printed on your bill. Many counties show a "due date" but don't charge penalties until a later "delinquent date." The difference can be weeks or even months.
How Much Can You Actually Save?
The savings depend on your property tax amount and how long you can defer payment. Let's look at real examples using median home values in different states, assuming a 3.5% APY savings account and an average deferral of 6 months per installment:
| State | Median Home Value | Tax Rate | Annual Tax | Interest Earned* |
|---|---|---|---|---|
| California | $906,000 | 0.81% | $7,339 | $70 |
| Texas | $353,000 | 1.60% | $5,648 | $73 |
| Florida | $408,000 | 0.80% | $3,488 | $149 |
| New York | $586,000 | 1.60% | $9,376 | $148 |
*Interest calculated at 3.5% APY with 6-month average deferral. Actual savings vary based on your specific situation and payment timing.
These numbers might seem modest, but remember: this is completely passive income. You're not doing any extra work—just changing where your money sits while waiting to pay a bill you'd pay anyway. Over a 30-year mortgage, a New York homeowner could earn over $3,800 just from this one simple change.
Research Your County's Real Deadlines
The key to maximizing your savings is knowing exactly when your property taxes actually become delinquent—not just when they're "due." These dates vary significantly by county, so you'll need to do some research.
Here's what to look for:
- Official due date — When the bill says payment is due
- Delinquent date — When penalties actually start (often weeks later)
- Grace periods — Some counties offer additional time before penalties
- Payment processing time — Allow 3-5 business days for payments to post
How to Opt Out of Escrow
Not all lenders allow you to opt out of escrow, and some charge a fee or require a certain amount of equity (often 20%). Here's how to check:
- Review your mortgage documents — Look for escrow waiver terms
- Call your loan servicer — Ask about their escrow waiver policy
- Calculate the break-even — If there's a fee, make sure your interest earnings exceed it
- Submit a written request — Most servicers require this in writing
If your lender won't waive escrow, you can still benefit from this strategy for any property you own outright, investment properties, or after you pay off your mortgage.
Setting Up Your System
Once you've opted out of escrow, here's how to set yourself up for success:
- Open a dedicated high-yield savings account — Keep your tax money separate so you're not tempted to spend it
- Set up automatic monthly transfers — Divide your annual tax by 12 and transfer that amount each month
- Research your county's exact deadlines — Find the delinquent dates, not just due dates
- Set payment reminders — Schedule reminders 1-2 weeks before each delinquent date
- Pay at the last safe moment — Usually 5-7 days before the delinquent date to allow for processing
The Bottom Line
Paying your own property taxes instead of through escrow is a simple way to earn free money. The key points:
- Escrow accounts earn you nothing — your money just sits there
- High-yield accounts pay 3.5%+ — that's $60-$130+ per year for most homeowners
- Property taxes have two installments — each with hidden grace periods
- Research your county's real deadlines — the delinquent date is what matters
- Never miss a payment — penalties far exceed any interest earned
The most important part of this strategy is never missing a payment deadline. Use House Reminders to set up recurring reminders for your property tax payments—once in the spring and once in the fall. You'll earn extra interest and never risk a costly late penalty.