Questions on hazard insurance and escrow defficiency (loan officer, property tax, income)
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I get a letter from my mortgage company a few days ago that tells me that they are expecting a $850 hazard insurance deficiency and $1700 tax escrow deficiency by may of 2011. They say i can send them a check for this amount or pay about $215 more per month over the next year to catch up for it.
How would this happen? I'm paying nearly $400/month in taxes already. The county appraised my home at $196,000 compared to $172,000 last year, but why would my taxes rise 43%??
And what is the deal with hazard insurance... i thought i was paying for that monthly as well.
Understanding how these numbers are determined will make all the difference. I don't have enough of your personal info to use your numbers so I will use generics but the calculations are the same.
Current escrow depsoits are $200 per month or $2400 per year for taxes and insurance.
Last bills total $3000. You have a shortage of $1200 ($600 short for last year and $600 short for the upcoming year).
You can pay $600 1 time to make up shortage and have payment go up $50 to cover higher expenses or you can have payment go up $100 ($50 for last year and $50 for new bills). If you pick to add $100 it will only be for a year of there are no other changes. OPnce the shortfall is made up your payment will decrease by $50. Not that there is much interest to be had but this is an interest free loan- no real reason to make the luimp sum payment.
I just finished off a year of this- April 1 payment is down $80 because shortfall has been made up.
Would I likely be in the same situation next year?
Also, my hazard insurance is basically my homeowners insurance, right? Their estimated defficiency for hazard insurance is more than my annual premium for homeowners insurance.
Yes, Hazard Insurance is homeowners insurance. You should determine if your insurance rates have gone up, and find out your actual property tax amount. Then you can determine what the correct monthly payment should be. You can then send in the shortfall for the last year.
If your home owners insurance has increased you should shop it around with other providers. If you have access to USAA insurance, they are tough to beat. Also AAA, the car club, offers good rates on home owners insurance.
Yes, I feel like my insurance company is playing games with me. They are being misleading with quotes i've been getting to have auto insurance with them too. I think i'll be shopping around.
Is your house newly built? This happens A LOT on new houses. If your house was a vacant lot shortly before you moved in, taxes very possibly were based on only lot value, so when the first tax bill comes, the lender has too much money in escrow so they send you a refund check. (They have both minimums and maximums that they are allowed to keep in the account). Then, either 6 months or a year later, when the tax bill is changed to reflect the value with improvements, they realize they don't have enough now, so they do exactly what you're seeing, they ask for either an increased payment or a lump sum. After I built my house, they sent me an escrow check refund of about $600. Some months later, they sent me a bill for about $600. I sent them their money back. If your hosue is new, did you get a refund check sometime in the last year?
If your house isn't new, I would double check that you were being charged the right amount for the last year. Look at what your total taxes and total insurance bill was for last year (make sure to get both halves of the taxes) and divide by 12. If you were being charged at least that much, then I would contact your lender and find out what the problem is. If you weren't, then your escrow account will be short, and they are correcting for that.
If you just bought the house recently, you can check with both your loan officer and your agent to make sure that the numbers you were given were what actually happened, and that your prorations at closing were correct.
Payments do change slightly from year to year, as insurance rates and taxes change, but that is a very drastic change for what your payment range is. Other than the aforementioned 1st year correction because it was new construction, my payment has varied within a $50 range for 7 years.
Are you in a fairly high cost of living area? My house is worth $135k and I only pay $350 for insurance and $1100 for taxes each year. My monthly escrow payment is only about $120. You said you are paying $400 a month in taxes alone!! Even figuring in more value and different tax rates, that is crazy. Is it a rental (no homeowner's exemption)? Even if so, that is very high. That is almost as much in taxes as my parents' 6000+ sq.ft. house was.
As for next year, it will change again, but without knowing what insurance and values will be, we can't say how other than:
This year: your payment is Principal + Interest + Increased Tax rate (X) + increased amount of taxes to make up the deficiency + Increased Insurance rate (Y) + increased amount of insurance to make up the deficiency.
Next year: your payment will be Principal + Interest + X + change for whatever tax rate does next year + Y + change for whatever insurance rate does next year.
Since you will not be paying for the deficiency anymore, your payment will most likely go down, but probably not to what it was before.
Is your house newly built? This happens A LOT on new houses. If your house was a vacant lot shortly before you moved in, taxes very possibly were based on only lot value, so when the first tax bill comes, the lender has too much money in escrow so they send you a refund check. (They have both minimums and maximums that they are allowed to keep in the account). Then, either 6 months or a year later, when the tax bill is changed to reflect the value with improvements, they realize they don't have enough now, so they do exactly what you're seeing, they ask for either an increased payment or a lump sum. After I built my house, they sent me an escrow check refund of about $600. Some months later, they sent me a bill for about $600. I sent them their money back. If your hosue is new, did you get a refund check sometime in the last year?
If your house isn't new, I would double check that you were being charged the right amount for the last year. Look at what your total taxes and total insurance bill was for last year (make sure to get both halves of the taxes) and divide by 12. If you were being charged at least that much, then I would contact your lender and find out what the problem is. If you weren't, then your escrow account will be short, and they are correcting for that.
If you just bought the house recently, you can check with both your loan officer and your agent to make sure that the numbers you were given were what actually happened, and that your prorations at closing were correct.
Payments do change slightly from year to year, as insurance rates and taxes change, but that is a very drastic change for what your payment range is. Other than the aforementioned 1st year correction because it was new construction, my payment has varied within a $50 range for 7 years.
Are you in a fairly high cost of living area? My house is worth $135k and I only pay $350 for insurance and $1100 for taxes each year. My monthly escrow payment is only about $120. You said you are paying $400 a month in taxes alone!! Even figuring in more value and different tax rates, that is crazy. Is it a rental (no homeowner's exemption)? Even if so, that is very high. That is almost as much in taxes as my parents' 6000+ sq.ft. house was.
As for next year, it will change again, but without knowing what insurance and values will be, we can't say how other than:
This year: your payment is Principal + Interest + Increased Tax rate (X) + increased amount of taxes to make up the deficiency + Increased Insurance rate (Y) + increased amount of insurance to make up the deficiency.
Next year: your payment will be Principal + Interest + X + change for whatever tax rate does next year + Y + change for whatever insurance rate does next year.
Since you will not be paying for the deficiency anymore, your payment will most likely go down, but probably not to what it was before.
Thanks for the input!
My house is indeed new... closed on it in january 2009. My insurance premium was based on $186,000 dwelling + $18,000 in additional posessions.
If they intended to mail a check back to me, i never got it. What if they mailed a check and I didnt get it or cash it?
I just spoke to mortgage company, here's what they say happened:
1) Insurance company raised my premium from $680 to $912....without telling me.
2) School taxes RAISED SUBSTANTIALLY.... almost $2000 higher than last year. That can't be right because my 2009 school taxes were already $2800. $4800 for school taxes on a house that cost me $165,000???
Who would I talk to to get this figured out? Guy from bank doesn't know how to handle it. By the way this is in San Antonio, TX where property taxes are pretty high.
You can go to the Tax Assessors office. Since you live in San Antonio i would think your county would be Bexar, here is a link to their site for contact info Bexar Appraisal District
I live in Plano, just north of Dallas and yes our property taxes are very high but we have no state income tax.
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