Mortgage borrowers pay a tax service fee to mortgage lenders to ensure that mortgaged property taxes are paid on time. If the previous owner of a property owes back taxes on it, the tax authority has the power to step in and seize the property, even if a bank also has a lien on the property. After the initial period covered by the tax service fee, your mortgage payments will generally include escrow payments, Kukwa said. To protect its collateral, Bank XYZ hires a tax services agency to monitor property tax payments on John's home.
Also known as document transfer tax, this fee can be paid by both the seller and the buyer, and is independent of your property tax bill, even if the same government evaluates both transfer taxes and property taxes. The tax service fee protects lenders by keeping property taxes up to date for the first few months after the purchase of one. In this case, the tax services agency can help ensure that the buyer purchases a property free of any property tax liability. If John doesn't want to pay the fee, he could open a garnishment account, which is an account with XYZ Bank where he pays a portion each month of the property tax bill (which the lender then sends to make the tax payment).
Unpaid property taxes could mean that the government taxing the taxes could be entitled to the property, which could jeopardize the lender's claim if you didn't pay your loan. Service fees are the amounts that AHS must pay to the Operator for the Services in accordance with this Agreement. Additional Service Fee means, for any collection period, if a successor managing entity has been appointed pursuant to Section 8.2 of the Sales and Service Agreement, the amount, if any, whereby (i) the compensation payable to that successor managing entity for that collection period exceeds (ii) the rate of monthly service for that billing period. The bank transfers this monitoring expense to John through a closing tax service fee (or sometimes as a fee included as part of his monthly escrow payment).
Tax service charges exist because lenders want to protect their access to the security in the event of a borrower default. Service charges are the rates charged by the municipality in terms of its pricing policy for any municipal service provided with respect to real property and include any fine, interest or surcharge charged or imposed in terms of this policy. Your lender will use that amount to pay a tax service fee that will cover property tax bills for a short period immediately after the home is purchased, for example, two or three months. Tax service fees are ways for lenders to ensure that there are no problems with local government entities or property taxes during the months after the sale.
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