How many months of taxes when buying in Berlin, CT?

When you purchase a home in Berlin please be aware that it may cost a bit more to close.  This is due to the town of Berlin being on an annual tax cycle instead of the more common, semi-annual tax payments.  What this does is increase the amount you need to set aside for your tax escrow to be established and it increases the amount you need to pay back the seller for at closing. 

What's an escrow?  In basic terms, an escrow account is a "savings" account that is established with the lender to hold your property taxes and insurance for when they are due.  One twelth of your property tax bill and home insurance bill is added into your monthly payment if you have these items escrowed.  With each monthly payment that you make, your escrow balance increases until the taxes or home insurance bill is due and paid out of the account.

Escrow accounts are regulated by the federal government to insure you are not required to have a "cushion" that is too high.  The account does earn interest and you will receive an annual 1099 for this interest.

Each year, the lender is required to perform an "Escrow Analysis" which will determine if your escrow pyments are enough or too much as your property taxes and home insurance can change annually.  If you have a shortage, the lender will generally allow you to make a one time payment to get caught up or will increase your payment to make up for the defecit.  If the analysis shows a surplus of funds, you will receive a check to reduce the amount being held.

An example of funds needed to cover your escrow to be established for proeprty taxes in Berlin - You are scheduled to close in January 2013.  Your first payment is due on March 1, 2013.  The lender would take eight months of taxes to make up the difference in payments from July 1 2012 - February 28, 2012.  There would be a cushion established of approximately 1.5 months.  You would also pay the seller back from the closing date through June 30, 2013 for taxes already paid.  Adding these together is what a buyer should count on in Berlin - 

8 (shortage in escrow) + 1.5 (cushion) + 5 (adjustment to seller Jan 31 - June 30) = 14.5 months of property taxes needed at closing.

Make sure your lender knows how we pay taxes in the town of Berlin when they prepare your good faith estimate so it is as accurate as possible, especially if they are from out of town/state.