Understanding Property Taxes and Escrow Accounts in Tennessee
If you own a home in Tennessee, or are getting ready to buy one, you’ve probably heard about property taxes and escrow accounts. They’re both important parts of your mortgage, but they’re not always easy to understand.
Here’s a simple breakdown of how property taxes work in Tennessee and how escrow accounts help manage them.
How property taxes work in Tennessee
Tennessee doesn’t have a state property tax, but each county and city sets its own rate. Taxes are based on your home’s assessed value, which is typically a percentage of its market value.
For example, in most Tennessee counties, the assessment ratio for residential property is 25% of market value. If your home is valued at $400,000, your taxable assessment would be $100,000. Multiply that by your county’s tax rate to estimate what you’ll owe.
Property tax bills are usually issued in the fall (often October or November) and are due by the end of February the following year.
Escrow accounts explained
When you have a mortgage, your lender typically collects money each month for taxes and homeowners insurance through an escrow account. Instead of paying your property tax bill once a year, you make smaller monthly contributions that your lender holds until the bill comes due.
When the county releases tax bills, your lender pays them directly from your escrow account on your behalf. This helps prevent missed payments and keeps your insurance and taxes current.
Why escrow balances change
Escrow accounts are adjusted once a year, and that’s when many homeowners notice their monthly payment changing.
If your property taxes increase, for example, after a countywide reassessment or if your home’s value rises, your monthly escrow contribution will likely increase to cover the higher cost. The same goes for changes in your homeowners insurance premium.
Your lender performs an annual escrow analysis to make sure there’s enough money to pay next year’s bills. If there’s a shortage, your payment will go up slightly to make up the difference.
Common Tennessee timing examples
Davidson County: Lenders typically pay property taxes in December from escrow.
Williamson, Sumner, Wilson, and Rutherford Counties: Lenders typically pay property taxes in November or December from escrow.
If you’ve refinanced recently, your previous lender may have refunded part of your old escrow balance, while your new lender built a new one. It’s normal to have that adjustment period where the two balances overlap. If you plan to refinance soon, ask your loan officer if they offer a way to apply your existing escrow balance as a credit at closing, which will help keep your new loan amount to a minimum.
The bottom line
Property taxes and escrow accounts can feel confusing, but once you know the rhythm, it’s easy to follow. Staying ahead of your county’s tax schedule and understanding how your escrow account works can help you avoid surprises and plan your budget more accurately.
If you have questions about how property taxes or escrow balances might change during a refinance, visit HomeLoanLocals.com. You’ll be connected with one or two trusted Tennessee lenders who can explain your options clearly, without the spam or sales pressure.