Tax Service Fee
Definition and meaning of Tax Service Fee in real estate.
A tax service fee is a one-time charge paid by a home borrower at closing to fund a third-party service that monitors property tax payments over the life of the loan. This monitoring ensures that the borrower pays their property taxes on time, protecting the lender from senior tax liens.
In more detail
Since local governments can place a high-priority lien on a property for unpaid taxes, mortgage lenders require verification that these bills are satisfied. The tax service company tracks the tax status of the property and alerts the mortgage servicer if payments are missed. This fee is typically part of the buyer's closing costs and is non-refundable.
For loans with escrow accounts, the tax service company coordinates the disbursement of tax payments directly from the lender to the municipality. This monitoring is vital for protecting the lender's security interest in the home.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Who pays | The home buyer or borrower |
| Typical cost | Low one-time fee at closing |
| Required by | Mortgage lenders |
At the closing of their home purchase, the buyer pays a tax service fee to establish ongoing tax monitoring for their mortgage.
Frequently asked questions
Can I opt out of paying the tax service fee?
No, if your lender requires tax monitoring as a condition of the mortgage, you must pay this fee at closing.
Do I have to pay this fee every year?
No, the tax service fee is a one-time charge paid at closing that covers the monitoring service for the entire duration of the loan.