Tax Service Fee

AAA

DEFINITION of 'Tax Service Fee'

A legitimate closing cost used to ensure that mortgagors pay their property taxes. A tax service fee is typically paid by the buyer at the time the home is purchased, the lender then passes this sum on to a tax service agency. The role of a tax service agency is to look for delinquent property taxes and alert the mortgage company to prevent tax liens from existng against their mortgagors' homes. Since tax liens have priority over lender liens, banks wants to ensure that they, not the state, become the owner of these properties.

INVESTOPEDIA EXPLAINS 'Tax Service Fee'

For borrowers with impound accounts, property taxes are collected monthly with mortgage payments; in this case, the tax service agency's job is to provide the lender with your property tax bills so that they will be paid on time. For borrowers without impound accounts, the mortgage company will often remit any unpaid property taxes on behalf of the homeowner and then bill him or her for the sum, plus penalties and fees.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Impound

    An account maintained by mortgage companies to collect amounts ...
  3. Lien

    The legal right of a creditor to sell the collateral property ...
  4. Tax Lien

    A legal claim by a government entity against a noncompliant taxpayer's ...
  5. Property Tax

    A tax assessed on real estate by the local government. The tax ...
  6. Closing Costs

    The expenses, over and above the price of the property that buyers ...
Related Articles
  1. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  2. Mortgage Points: What's The Point?
    Credit & Loans

    Mortgage Points: What's The Point?

  3. Mortgages: How Much Can You Afford?
    Budgeting

    Mortgages: How Much Can You Afford?

  4. Home-Equity Loans: The Costs
    Options & Futures

    Home-Equity Loans: The Costs

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center