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As a personal finance nerd, I get pretty excited when I have a big money win. This week I had a major win, I found $718.05 that I didn’t know I had!
My first thought – I need to tell my wife about this.
My second thought – I need to write a post about this.
Three years ago when we first bought our home, our mortgage provider offered us an option regarding our property taxes. Normally we would pay the property tax ourselves with saved money. I think our amounts to around $1500 per year (That’s Canadian, so around $87USD). The bank offered to collect the property tax from us monthly as part of our mortgage payment and then remit the tax on our behalf at tax time.
Being that we were still fairly new to budgeting and living on a fairly tight one, we took them up on it.
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I’m not entirely sure why banks offer this option. According to this article at ratehub.ca, it’s because if you fail to pay your property taxes, the municipality or city can put a lien on your home. This lien might supersede any claims by the lender and leave them with a loss.
How Much Do They Take?
Of course the bank doesn’t know what our house is going to be assessed at in any given year. They just estimate high based on historical data. This Spring marked the third year of the bank remitting our property taxes for us (which I highly recommend if you’re trying to stick to a budget!).
It turns out we have been overpaying into our property tax account.
It started yesterday afternoon when I was opening some mail. We received a mortgage statement which was typical. Something caught my eye though – I saw in the top corner of the statement that we had a balance of $974 in our property tax account. This seemed odd as it’s July and we just paid our property taxes at the beginning of last month.
Each year the bank adjusts the amount that we pay monthly by a few dollars to account for changes in property value. I assumed that this change accounted for any extra funds that were accumulating in the account – I was wrong.
Loaning money to the bank
Of course, having nearly one thousand extra dollars there that we couldn’t access was not acceptable to me. It was more or less loaning the bank my money interest-free, a courtesy I can’t recall a bank ever extending to me. I phoned them today and asked them that they send the extra cash back to me asap.
The bank indicated that they were able to release $718.05 of the money back to me. They still wanted to keep some of the money back as a surplus in case our tax rate jumps next year. It’s also a month past tax time now so a few dollars of the accumulated cash is allocated to next year’s property taxes.
It was obvious to me that I could have gotten more of the money paid back to us if I’d dug my heels in, but the surplus thing is prudent from our end as well. I like having a little padding when it comes to bills that can fluctuate.
Celebrating the wins
Needless to say, I’m stoked! I wanted to jump on here real quick and share this with my audience in case anybody else has some extra cash sitting in a prepaid property tax fund that they could reclaim to invest, pay down debt or whatever.
What to do with the extra cash?
Honestly, my first thought was: MOTORBIKE FUND WOOOOOOO!!!!
As always, reason took over (ok, maybe not always), and we decided to put the cash to better use. We’re going to use it to get ahead of our car insurance for next year. For years we have been stuck on the financing plan that the insurance company offers.
It’s ok, but it is more expensive than paying up front. It’s also better to be making that payment to ourselves every month in preparation for the next year. We can set the money into something like a low-yield savings account that way. Every little bit helps.
Anyhow, that’s all for today. If you’re prepaying your property taxes through your mortgage lender, you might have some extra cash kicking around that you didn’t even know about!
Question for you:
Where is the last place you found some unexpected cash?