At closing you may be required to prepay the interest for the period from February 10 through the end of February. This means that if you settle later in the month, your closing costs will be less than if you settle early in the month. Your lender sets up the escrow account by adding the cost of the insurance policy and taxes to your monthly mortgage payments. That portion of your payments is kept in reserve until the bills are due. Each year, the bills will be sent directly to your lender, who will make the payment for you.
Property taxes are the most common expense to be prorated between the buyer and seller.
Your closing agent will split the taxes so that you take responsibility for them at closing. If the seller already has paid taxes beyond that date, you reimburse the seller. Or, if taxes for the current period have not yet been paid, the amount owed is deducted from your settlement payment. Your lender may include property taxes in your monthly mortgage payments and put them in an escrow account for you. Recording Fees and Transfer Taxes Recording fees and transfer taxes are charged by most states for recording the purchase documents and transferring ownership of the property.