New homeowners 65 and over homestead shortage (Austin, Howe: homeowners insurance, mortgage, credit)

[jc05]

Hello,
My husband and I just bought a house September 2018. The previous owners had a 65 and over homestead and so the lenders were not able to calculate the property taxes. Our realtor told us to expect a shortage on our escrow come the new year to make up the difference.

We received a check in the mail last month for an escrow surplus of $980. I'm confused as to why I'm receiving this check. Should we save this money to pay taxes next year?

Also, we've been saving $200 extra each month and plan to use it in any property tax increase so that our mortgage doesn't shoot up. My husband is upset that we are going to end up being short $3000 in escrow. Does this sound right? We dont want to have to be saving $200 extra each month if we dont need to.

Please help me understand how and why my mortgage will increase next year (2020)

[Trainwreck20]

A realtor can answer the surplus question better than me, but I know there are some odd accounting that goes on with escrow for taxes and what has already been paid in, etc. I suspect that the 65+ extension is good for the year, though? I don't know how the county handles partial years and changes in exemption status.

And to be pedantic, your mortgage will not change. Your tax bill will change. While those are now usually bundled together by the lender, they are different things. You can very precisely calculate your taxes if you know the 2019 appraise value and then see how much you will owe in taxes.

[turf3]

Call your county tax assessor.

[Trainwreck20]

Here is your taxes on a $400k house in the city limits of Austin:

[Cd225]

Estimated tax for an Austin property can be found at the Travis CAD website. That can be compared to the house payment to see if it’s going to be enough. Just an example. Each county would have their own info, most likely online.

Travis CAD - Property Search

[Mark Senior]

Your thread heading says: New homeowners 65 and over... are you too, also, applying for over 65 homestead exemption? You should have applied for this tax year, I don't remember, it's been 15 years since I dealt with this, I think you can still apply for this year, not sure really.

As I remember, the tax distribution should have been, and likely was, settled at closing, with you paying what you should or you getting credit for what you will pay at the next time taxes are paid on the property you bought. This is a normal expected work of the title company at closing. Someone working for the title company at least, if not your agent, is there was one, should have explained this in detail at the time of closing.

Also, soon after you closed within several months, you should have received a letter from your appraisal district asking you what YOU paid for the property. I don't know how many people tell the appraisal district, you don't HAVE to tell, unless you can prove you paid less than what the district has it valued for, of course, this would be an advantage to you, tell them. Later if they have it appraised at more than you paid, you can easily prove what you RECENTLY paid for the property they would easily reduce their appraisal of you property, I've "been there done that" on all of this paragraph.

Oh of course, you total house payment MAY, only may, go up, if for the first year there is, in fact, a shortage in your escrow account, but the monthly payment would likely stay at the new payment amount, at least until property taxes go up, homeowners insurance goes up. Again, it unlikely, but possible you monthly payment, because of shortages in your escrow could go up a second year, but likely NO more years because of the initial shortages in your escrow, again, it may not go up for the second year, again, "been there done that."

You may be concerned for nothing. Good luck to you, yep, the best bet is to call the appraisal district for most of this, you can have the title company explain what happened at closing for answers to the rest of your questions. Again, best of luck.

[AlterEgo42]

Originally Posted by jc05

Hello,
My husband and I just bought a house September 2018. The previous owners had a 65 and over homestead and so the lenders were not able to calculate the property taxes. Our realtor told us to expect a shortage on our escrow come the new year to make up the difference.

We received a check in the mail last month for an escrow surplus of $980. I'm confused as to why I'm receiving this check. Should we save this money to pay taxes next year?

Also, we've been saving $200 extra each month and plan to use it in any property tax increase so that our mortgage doesn't shoot up. My husband is upset that we are going to end up being short $3000 in escrow. Does this sound right? We dont want to have to be saving $200 extra each month if we dont need to.

Please help me understand how and why my mortgage will increase next year (2020)

There is no way to help you do the math without know the actual numbers.

The $980 was the difference between the projected taxes that they've been impounding, and the actual tax bill, less the statutory amount that needs to be maintained in the escrow account. (I think this is 2 months of reserves for HO Ins and taxes?).

The net tax bill will not have the 65+ exemption, which will means all of a sudden, your escrow account will be way short and they will make you catch up. I don't think it's going to be $3K short though, but it could be if the house is $500-600K I guess.

You really need to compare old tax bill to new tax bill and do the math. It's a good thing you've been stashing the $200/mo aside, add the $980 to that until you can get the actual numbers to do the math with.

[Trainwreck20]

Originally Posted by AlterEgo42

I don't think it's going to be $3K short though, but it could be if the house is $500-600K I guess.

It all depends on how long the school tax has been frozen. Even on a $300k house, that would not be hard to imagine that increase.

[AlterEgo42]

Originally Posted by Trainwreck20

It all depends on how long the school tax has been frozen. Even on a $300k house, that would not be hard to imagine that increase.

That’s true. But based on the $980 refund, I still don’t think a $3K shortfall would be in place. However, it’s all speculation without knowing what the actual numbers look like.