If you are planning a move in The Woodlands, the number on your mortgage calculator probably does not tell the whole story. Escrows, MUD taxes, and monthly water bills can change your payment more than you expect. You deserve a clear picture before you write an offer or set a list price. In this guide, you will learn how escrow works here, how MUDs affect your taxes and budget, and exactly what to gather to get accurate numbers. Let’s dive in.
Escrow basics in The Woodlands
What your lender usually escrows
Most lenders set up an escrow account to collect money for property-related bills. Under federal rules, servicers typically escrow:
- Property taxes, including county, school district, The Woodlands Township, and your MUD line items.
- Homeowner’s insurance, and flood insurance if required.
Servicers must follow federal escrow accounting rules and provide an annual analysis that shows shortages or surpluses. You can review those requirements in the CFPB’s escrow rule summary at the federal site for escrow account regulations.
Water and sewer usage are not part of escrow. In The Woodlands, Woodlands Water bills these monthly, and you pay them directly. You can see billing and payment options on the Woodlands Water payment page.
When escrow is required
Government-backed loans usually require escrow. Conventional loans often require it with less than 20 percent down, and some lenders let you waive escrow with a larger down payment. For a quick overview of common lender practices, see this consumer guide on how mortgage escrows work.
Why your payment can change
Even with a fixed interest rate, your monthly payment can rise when your escrow changes. MUD tax rates, school district taxes, and The Woodlands Township rate can go up or down year to year. Your servicer must run an annual escrow analysis and adjust the monthly collection based on new bills.
MUDs and your tax bill
What is a MUD
A Municipal Utility District is a local government entity that finances and operates water, sewer, and drainage infrastructure. MUDs issue tax-exempt bonds and repay them with ad valorem property taxes within the district. You can read the state framework in the Texas Water Code for MUDs.
How MUDs work in The Woodlands
The Woodlands is served by several residential MUDs. Woodlands Water manages day-to-day water, sewer, and tax billing functions for these districts, while each MUD board sets its tax rate. MUD tax lines vary by district, which means two similar homes in different villages can have different annual taxes. Woodlands Water publishes current and historical rates on its MUD tax page.
The Woodlands Township is a separate taxing unit. For 2024 and 2025, the Township adopted a property tax rate of 0.1714 per 100 dollars of taxable value. You can verify the current adopted rate on the Township’s Finance and Taxes page.
Required buyer notice
If a property is in a MUD, Texas law requires the seller to provide a “Notice to Purchasers” before the contract is signed. The notice includes the MUD’s tax rate, bonded indebtedness, and any fees or assessments. Many districts also post this notice online. You can review an overview of the rule changes here: Texas MUD notice requirements.
What goes into your monthly payment
Typical monthly components
- Principal and interest on your mortgage.
- Escrow for property taxes, which includes county, school district, The Woodlands Township, and MUD lines.
- Escrow for homeowner’s insurance and flood insurance if required.
- HOA dues if applicable, usually billed separately.
- Water and sewer from Woodlands Water, billed monthly and paid directly.
- Other items like private flood insurance, if applicable.
Sample monthly budget in The Woodlands
The following example shows how MUD taxes and exemptions move the needle. It is illustrative only. Use the exact tax breakdown for the specific address.
Assumptions:
- Home price 400,000 dollars, loan 320,000 dollars at 6.50 percent fixed for 30 years.
- Composite tax rate 1.7002 percent for all entities combined. This composite is commonly seen in neighborhood examples, but you should confirm the actual parcel rate. See a neighborhood composite example on HAR’s tax breakdown page.
- Homestead exemption scenario 1: none. Scenario 2: 100,000 dollars school homestead exemption, which reduces taxable value. For current exemption law, see the Texas homestead exemption statute.
- Homeowner’s insurance 1,500 dollars per year. HOA 100 dollars per month. Water and sewer 70 dollars per month.
Illustrative results:
- Principal and interest on 320,000 dollars at 6.50 percent is about 2,022.62 dollars per month.
- Annual property tax without exemption at 1.7002 percent on 400,000 dollars is about 6,800.80 dollars, or 566.73 dollars per month in escrow for taxes.
- With a 100,000 dollars school homestead exemption (taxable value 300,000 dollars), annual tax is about 5,100.60 dollars, or 425.05 dollars per month in escrow for taxes.
- Insurance escrow adds about 125.00 dollars per month.
- Total mortgage payment with escrow: about 2,714.35 dollars per month without the exemption, or about 2,572.67 dollars with the exemption.
- Add HOA and typical water and sewer to see your full monthly housing outlay: about 2,884.35 dollars without the exemption, or about 2,742.67 dollars with the exemption.
Key takeaway: MUD and other tax lines drive your escrow. Even small rate differences across MUDs can change your monthly budget.
How to confirm your numbers
Buyer checklist
- Request the property’s MUD “Notice to Purchasers” and review the current tax rate, bonded debt, and any pending bond authorizations or special fees. See the overview of MUD notice requirements.
- Ask for the most recent tax bill with the full line-by-line breakdown, including the MUD line. Compare to nearby areas using the Woodlands Water MUD tax page.
- Ask your lender whether escrow is required and request a 12-month escrow projection. Lenders must follow federal escrow accounting rules.
- Review the last 12 months of water and sewer bills if available. Woodlands Water uses winter sewer averaging, which can affect next year’s charges. Learn how it works on the winter sewer averaging page.
- If the property has an HOA, get the resale packet and dues schedule and add those to your monthly budget.
- Confirm current exemptions with the appraisal district and your title company, and review the Texas homestead exemption statute.
Seller checklist
- Provide the MUD “Notice to Purchasers” to the buyer before contract. If you do not have it, request it from the MUD or confirm the posted version on the district’s site.
- Share the most recent tax bill and any proof of payment so the buyer and title company can settle prorations and escrow adjustments smoothly.
Budget tips for Woodlands homeowners
- Claim exemptions early. Homestead and other exemptions can lower taxable value and reduce your escrow. Review current rules in the Texas homestead statute.
- Check your MUD rate annually. Rates can change as bonds are issued or refinanced. See current tables on the Woodlands Water MUD tax page.
- Plan for water and sewer. Woodlands Water bills monthly, separate from escrow. Review billing practices on the payment options page and the winter sewer averaging page.
- Watch Township updates. The Township sets its own rate each year. Verify the current rate on the Finance and Taxes page.
Ready for clear, property-specific numbers for your next move in The Woodlands? Reach out to Kayla Nealy for a calm, concierge-style consult and a customized payment breakdown for the address you have in mind.
FAQs
What is a MUD tax in The Woodlands and how is it billed?
- A MUD tax is a property tax set by your local Municipal Utility District to repay infrastructure bonds. It appears as its own line on your annual property tax bill and can be included in your mortgage escrow.
Does my mortgage payment include water and sewer in The Woodlands?
- No. Water and sewer are billed monthly by Woodlands Water and are usually paid directly, not through your mortgage escrow.
Why did my monthly escrow payment increase this year in The Woodlands?
- Your servicer performs an annual escrow analysis. If property taxes or insurance went up, including the MUD or Township rates, the servicer increases your monthly escrow to cover the new total.
How do I find the MUD for a specific Woodlands address?
- Check the most recent county tax statement for that parcel to see the MUD listed by name, or contact Woodlands Water for district information tied to the address.
What is the current tax rate for The Woodlands Township?
- For 2024 and 2025, the Township adopted a rate of 0.1714 per 100 dollars of taxable value. Always verify the latest adopted rate on the Township’s finance page before you finalize numbers.
