Principal, Interest, Taxes. Payments due regularly under the terms of the mortgage agreement typically include a component to pay the estimated annual property and school taxes on the property. If, for example, regular payments are to be paid monthly, then one-twelfth of the estimated annual taxes are added to the monthly mortgage payment amount. Since the tax amount is an estimate and since these taxes can change annually, the portion of the mortgage payment attributable to taxes may also change. Moreover, upon issuance of the annual tax notice by a municipality, the lender may determine that the amount of funds held in your tax account is insufficient. Therefore, the lender will require you to “top up” your tax account with an additional amount. Funds retained in your tax account typically earn a small rate of interest from the lender.

A paymnet that applies to the principle of the mortgage, the interest on the mortgage and also pays monthly the property taxes.

Principal, interest, and property tax due on a mortgage. If your down payment is greater than 25% of the purchase price or appraised value, the lender will allow you to make your own property tax payments.