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Agreed with the others that this is perfectly normal for escrowed mortgages, and directly tied/proportional to the increase in your property taxes and/or insurance. The real cause of the increase is county tax assessment and/or the insurance company, not the mortgage company.
When this has happened to us, we've either been given the choice between 1) pay the shortage in a lump sum, or 2) see the monthly payment go up. I've usually done the former, as I like to keep our required monthly bills as low as possible. Last year, we had the reverse happen where we got a large check from the insurance company for an escrow overage. We had put on a new roof and saw our homeowners insurance premium go down quite a bit, along with having switched insurance companies and pushed back the policy renewal date to further in the year. This was in conjunction with our monthly payment going down due to a lower monthly amount needed to cover taxes + insurance.
Historically, I've wanted to avoid escrow, since I'd rather bank/save the money and pay insurance/taxes myself and decide how much of a savings buffer we really need. However, I found out the first year of our mortgage refinance that the new company pays us interest on our escrow account, and the interest rate seems better than what we'd get from a "high yield" savings account. So I may consider staying put with escrow until the mortgage is paid off.
I just talked to my loan officer and he said it's due to property taxes going up. Seems like a huge jump, no? This is my 3rd year here. My payments have been as follows:
2013: 1041
2014: 1014
2015: 1102
88 dollar jump is pretty big. I have the money, but I still am unhappy. I don't see why my property rates are going up. My house was only 175k. There are a lot of brand new 300-500k houses in my city, so maybe that's why. I don't know how it works, but it seems weird how it can jump around like that. Could it get to the point where I'm paying 1200 a month in 5 years? The best part of my house is the low payment. 1014 is a lot better than 1102. That's An extra thousand dollars per year.
Depending upon the area in which you live, property taxes can go up every year and in some areas very significantly. Tax rate can increase due to reassessment, school budget, services, etc. which leads to your taxes being increased.
Depending upon the area in which you live, property taxes can go up every year and in some areas very significantly. Tax rate can increase due to reassessment, school budget, services, etc. which leads to your taxes being increased.
Twin Cities minnesota. Very high taxes in Minnesota.
I was going to say...that's wishful thinking in New England. Once your taxes go up, they almost never go down.
That is too bad. When home values declined everone in California was having their homes value reassessed. The year after we bought values dipped down a bit and all I had to do was call the County assessors office. They looked at the values in the neighborhood and reduced the tax bill accordingly. when it went back up we did not have to even make a call. LOL The county took care of it for us. That was the sticker shock year for us. From now on it will only go up based on that 2% increase in value.
When your property tax goes up, you will appreciate those HGTV shows that encourage people to flip property and make a quick buck. That inflation of property values drives your taxes up, meaning that YOU end up paying for the money the flippers get. Of course, if your property is "worth" more, the insurance and mortgage company will demand you increase your insurance as well. We were pawns in that game during the bubble in south Florida.
Why would an individual owner care if another property value goes up?
How would this benefit me? I actually like having it taken out automatically.
Because they fund the escrow well in advance and project increases so the amount in escrow is higher than the actual expense. They pocket the interest/investment revenue earned. Calculate when you get beyond 20% and have it removed. You can always setup automatic payments directly to the insurance/tax entities if convenience is what you are wanting.
Why would an individual owner care if another property value goes up?
Because values are based upon comps in the area. If three of us have identical houses, and two are flipped with a $50,000 increase in sale price, I will have to pay my taxes for the third house based upon the values of those houses. If the entire neighborhood is flipped up in value when sales are made, everyone in the neighborhood gets re-assessed at a higher rate.
Tip: Once you are in your mortgage for a few years, you can likely have your home owners insurance dropped from escrow and pay it yourself. That'll give you about a years break or a lump refund from your escrow.
Also keep in mind that often once your payment increases it is because you are covering the amount of your liability that was in the red (be it insurance or taxes) AND the increase for the higher escrow amount going forward. You are often given the option of a lump some payment for the former but not the latter.
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