Why is my Escrow Payment Changing
85One of the most complicated things to explain to a person could very well be an escrow (A.K.A. impound) account. I receive call after call asking why the payment is going up on a fixed rate loan, or why the payment is going up so much. Remember the escrow account is what covers your taxes, insurance, possible MIP (Mortgage Insurance Premium) or PMI (Private Mortgage Insurance) and any other Optional Items you may wish to carry on your mortgage account. Allow me to start with a basic example. If a loan has an escrow account covering; Taxes at $1200 per year, and Insurance at $600 per year. The escrow must collect $1800 per year to pay these bills. Your mortgage is paid 12 times per year, therefore 1800 / 12 = a monthly mortgage payment of $150. Here is where it gets tricky, lets say your taxes go up by $400. Your new yearly expense would be $1600 for taxes and $600 for insurance = $2200 per year / 12 = 183.33 as your new payment....right ? Far from it. Allow me to explain why your escrow can change dramatically from the smallest change. Mortgage companies can require an escrow account to hold a min. requirement or cushion. This cushion can be between 0 - 3 months (most companies use a 2 month cushion). When they reanalyze your escrow account, the company is looking at the up coming 12 months...and they are looking for the lowest balance within that 12 months. Using the example on top. If you had a $150.00 escrow payment your required cushion would be $300.00. Lets even make it nicer and say that for the year you ended with that cushion. So starting January your escrow balance is $300.00. For the sake of this example we will say your taxes are due in May and the insurance is due in August. Remember you already have $300, and with the new payment you will pay $183.33 per month to the escrow, BUT the new cushion with a $183.33 monthly escrow payment is $366.66.
Jan payment make the escrow balance $483.33 / Feb $666.66 / March $849.99 / April $1033.32 / May $1216.65 (Time to pay Taxes [-$1600.00]) new May Balance -$383.35 / June -$200.02 / July -$16.69 / Aug $166.64 (Time to pay Insurance [-$600.00]) new Aug Balance -$433.36 / Sept -$250.03 / Oct -$66.70 / Nov $116.63 / Dec $299.96. See it wasn't that bad, and we even ended with a positive balance, good right ? Nope, if you recall we are looking for the lowest point over the 12 months, and your required Cushion or low point is $366.66...so lets compare, you may not fall below $366.66, but in the Month of Aug you ended with -$433.36...that is a difference of $800.02 !!! Here you company may give one of two choices...or both, you can either Pay $800.02 up-front, and you escrow payments will be 183.33...or the #800.02 will be spread over 12 months, adding $66.67 to the 183.33 making the monthly escrow payment $249.99. So because your Taxes went up $400..one way or another, over the next 12 months, you will pay an extra $800.02.
How to get around this...here are a few ideas; 1- Check with your tax assessor for any tax exemption you may qualify for. 2- Shop your insurance company, quotes are free, and it doesn't hurt to find out. 3- If you know your taxes or insurance is going up, start putting a little extra to your escrow on a monthly basis.
On a good note, if your lowest point for the next 12 months is $50.00 above your required Cushion, you should receive a refund for overpayment. I hope this helped, if you have any questions, I will be happy to answer them.
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here is what my mortgage company has listed.
Escrow waiver requests vary in certain states. There are common fees that are associated with escrow waiver. Full waiver incurs a fee of .25% of the original loan amount and partial waiver is .125% of the original loan amount. In most cases the loan-to-value (LTV) must be less 80% or less.If the borrower is non-escrowed they would have paid these fees at closing or will be required to do so now. Specific requirements are as follows: Loan must not be a government loan California loanEscrow waiver requests vary in certain states. There are common fees that are associated with escrow waiver. Full waiver incurs a fee of .25% of the original loan amount and partial waiver is .125% of the original loan amount. In most cases the loan-to-value (LTV) must be less 80% or less.If the borrower is non-escrowed they would have paid these fees at closing or will be required to do so now. Specific requirements are as follows: Loan must not be a government loan California loans may drop escrow regardless of LTV with no waiver fee New Jersey and Virginia must be under 80% LTV, but pay no waiver fee Illinois, standard waiver rules apply however, if the LTV is less than 65% the borrower is not charged s may drop escrow regardless of LTV with no waiver fee New Jersey and Virginia must be under 80% LTV, but pay no waiver fee Illinois, standard waiver rules apply however, if the LTV is less than 65% the borrower is not charged.
keep track of your escrow and pay extra into as it seems like they never take enough out and the end of the year my payment goes sky high.
good luck
We got the mortgage for our first home from Bank of America in 2007 with Escrow included. Being new home owners we did not know that we were supposed to file for residency with the our tax office. Your payments when from $767.20 to $817.68. We found out and filed for residency June of 2008. Our payments still increased to $1120.00. We called customer service and asked to have our escrow account reanalyzed, we told them we could not afford $1120 a month. They told us that they could not help us until this year's tax bill was available. At that time our payments were current and we were not behind. Recently our Mortgage has went into default, when we sought help from their programs we were denied because the payments are so high there's a deficit in out budget. This can't be right can it? Shouldn't we have the right to request that our escrow be reanalyzed? And shouldn't we have the right to ask that our insurance be taken off the escrow or get less expensive insurance?
We have had a mortgage with a lender for 5 years. The lender sold our mortgage to another lender. I received a notice that the new lender requires a 2 month escrow cushion, about $1,000 and we either pay it or our mortgage payment goes up $50+ per month for a year. There have been not changes in our taxes, insurance, etc. with the exception of an $8.00 per month increase in County tax. Can this new lender change the rules of the game on us like this?
Glad I found this.. But, what I'm confused about is, what happens when the county taxes go down, in my case, $500 since the last fiscal year... But, they want to increase my payment, for impound shortage, about $150 per month, or $1440 up front.... I'm so confused on this one....
Help...I am confused. I just found out my mortgage is going up $125 more a month. This is a lot of money for my family, as we live paycheck to paycheck. Our house is only valued at $60,000, but it is in my mother n law's name who also has her home worth $85,000 mortgaged. We were under the impression that homes under $100,000 are tax exempt. However; this year she recieved a notice that since she is the primary owner of both the mortgages that we have to add the value of both homes and pay taxes on each property. Is there any way that she put the taxes of both houses off on our mortgage and that is why our note went up so much? Just wondering if anyone knows!!
Danalea1 3 years ago
I am 8 months into a mortgage (purchased in Oct 07). I didn't know at the time that I could elect to pay my taxes-not have them go into an escrow acct.-also had to get flood insurance (which I paid in full thru Oct 08 to my own insurance comp.) I want to know if/when/how I can stop paying my taxes and flood insurance into my escrow acct. and pay them directly myself? I live in Massachusetts--Thanks Dana