Key takeaways
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Refinancing a mortgage does not directly affect property taxes, but the terms of the new mortgage could impact how you pay them.
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Consider the timing of your refinance in relation to when your property taxes are due, as you might need to settle them at closing.
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A cash-out refinance could indirectly impact your property tax bill if you used the funds for substantial upgrades that increased your home’s value.
Many factors influence how much property tax you pay as a homeowner, including the rates set by your municipality and the assessed value of your home. Generally, refinancing your mortgage does not impact your property taxes outright. Here’s what to know.
How does refinancing a mortgage affect property taxes?
Refinancing your mortgage does not impact your property taxes, at least not directly. However, there could be ramifications depending on type of refinance you do:
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A straightforward rate-and-term refinance, in which you simply swap your current mortgage for a new one at a new rate and term, doesn’t typically trigger any property tax changes.
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A cash-out refinance can potentially impact your property taxes if you’re using the cash for a remodel. Those upgrades could trigger a reassessment that raises your home’s assessed value and property tax liability.
In addition, a new mortgage could come with new terms — especially if it’s with a different lender — that can affect how you set aside cash from your budget for property taxes, says CPA Lisa Greene-Lewis, senior communications manager at Intuit.
“Homeowners need to consider whether the new loan will require them to impound their property taxes — meaning pay them every month with the loan payment — or whether they will pay them twice a year outside of the loan,” Greene-Lewis says. “This is a consideration as it may depend on your finances and your stream of income. Some people prefer to pay their property taxes twice a year instead of having that bump out of their pocket every month.”
If you’re picking a new lender, though, that lender might have different escrow requirements, and you might need to fund the escrow account before the old lender refunds the balance. Some lenders don’t give borrowers the option to self-pay property taxes, either.
Does a refinance appraisal affect property tax?
Property taxes are based on the home’s assessed value, not the appraised value. The appraised value is determined by a professional appraiser — not the local tax authority — usually when a borrower applies for a mortgage to buy a home or refinance.
Paying property taxes when refinancing
Similar to when you closed the original mortgage, refinancing to a new mortgage involves budgeting for closing costs, including any property taxes. Make sure you understand:
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Where you are in the tax year: Depending on where you live and the timing of your closing, your property taxes might have already been covered. For example, in Illinois, property taxes are typically due on June 1 and September 1. In Arizona, the due dates are October 1 and March 1. If you currently escrow these payments with your lender or servicer, contact them to learn if they’ve already made the payment for the year. If you pay taxes yourself, verify this with your local tax authority.
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How much you might need to pay: If your new lender requires you to escrow the tax payments, you’ll likely be responsible for prepaid property taxes at closing. The amount is based on your area’s tax due dates.
While you’ll be paying closing costs and handling a lot of paperwork while refinancing, there’s one piece of good news: You might still be able to take advantage of a property tax deduction if you itemize your returns. Whether your property taxes are impounded monthly or paid twice a year, you can still deduct up to $10,000 in total state and local property taxes through tax year 2025.
Next steps for refinancing your mortgage
If you’re considering refinancing a mortgage, shop around to find the most competitive interest rate. Consider how long you intend to be in the home — our refinance breakeven calculator can help you pinpoint when you’ll realize savings.
Learn more: Compare current refinance rates
FAQ
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Does your property tax get reassessed when you refinance?
Refinancing your mortgage won’t usually trigger a property tax reassessment. However, if you do a cash-out refinance and make value-adding renovations to your home with those funds, that could prompt a reassessment — and a boost in your property tax bill — later on.
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What happens when you finalize your refinance near or on the date your property taxes are due?
When refinancing close to your property tax due date, you might have to pay these taxes at closing, or immediately fund a new escrow account with the tax due.
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Will my property taxes go up if I pay off my mortgage?
Property taxes do not go up when you pay off your mortgage. They are based on the assessed value of your home, not the presence of a loan.
