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Homeowners insurance on a rental property is significantly more expensive than on owner occupied properties. Your insurance company raised your premium a lot and billed your mortgage company the difference. Your mortgage company had only been collecting enough from you to pay the old smaller premium. Your payment goes up because you have to now pay enough each month to pay the new higher premium AND make up the money the mortgage company already advanced on your behalf.
How much your payment would go up depends on how many monthly installments with the "wrong" escrow payment you made between the last account audit and the payment of the new insurance premium.
You may also have lost a homestead exemption when you moved out and will therefore have much higher property taxes.
How much is insurance for you that a $2800 increase per year is reasonable? I only pay $350/year total for homeowner's insurance. My mom's, which is a very nice 3000 sqft house, is only $1800/year. I looked up the only one of our rentals I actually have access to look up, and it is $1200/year. I can't imagine a $2800 increase. For me, that would be almost 10 times what I currently pay.
Insurance is high here. I pay $900 for a small home, owner occupied. I think that could almost double if I got tenants.
The OP didn't give me enough information to try to run any figures, so I gave OP a general explanation of how escrow accounts work without checking the figures.
I sent the full document to my step-dad. He's pretty smart financially speaking. This is what he just sent back to me.
It is very confusing! What I think happened is:
They under-withheld the last year due to an increase in Tax and Insurance (T&I) so that you ended up after the April 2011 payment with -$657 deficit versus a projected +863 surplus so about $1500 less than projected. They are required to have a surplus of $294.
It appears that the under-withholding in years 10-11 was due to significant increases in T&I from years 09-10 to 10-11. I base this on them missing the mark so far in 10-11.
Then if you look at the projected 11-12 versus actual 10-11 for T&I, there is another large increase.
When you add the deficit of $657 to the required surplus of $294 plus the year over year increase of T&I then you end up with a significant increase.
Now having said that, I still can not make sense of what they sent. County taxes look "okay" if the county has said that taxes are rising by about 30%. The payments are going from $1224 to $1612 so little over 31%. You should be getting a tax notice that would verify how much is due.
The insurance looks ever more weird. During the 8 months ending April 2011, you paid $955 in December, then $728 in April 11. Then looking at the next 12 months, you pay $728 again in May 2011 but not again until May 2012. Something does not compute!
Having back to back months paying $728 then not again for a year and then $728 seems like maybe the April or May 2011 is a duplicate. Ask them.
If there is any good news, a big part of the big increase of $235 per month is catching up for being in arrears at the end of April 2011. Once you get through the year and get your reserve back, then the payments for the following year would drop about $140 per month assuming no T&I increase. That $140 is the difference in $235 and the $195 for the projected T&I in the next year, that is $728 + $806 twice.
Bottom line, it is a combination of them under-withholding in the last year and T&I increases.
Insurance is high here. I pay $900 for a small home, owner occupied. I think that could almost double if I got tenants.
The OP didn't give me enough information to try to run any figures, so I gave OP a general explanation of how escrow accounts work without checking the figures.
Yeah, sorry everybody. Didn’t really want to post the whole document here of course. I'm sure it would have help to see all the figures though. I just was trying to sort if it was a tax problem or if it was an insurance problem for such a high increase. It looks like I'll need to talk to the County, my Lender & the Insurance company to make sure no mistakes have been made.
It just seems paying an extra $3000 a year for homeowners is a bit much (at least as far as I know). Of course I'm not even sure what would be a somewhat standard rate for that. I know it would depend on a lot of factors.
Brick Ranch built in 1954
1,035 Square Feet
3 bed / 1 bath
Alarm System
DeKalb County Georgia
Thanks Lacerta, something does seem wrong with it. There isn't a mistake for the decimal as far as the paperwork I got though. Those are the actual two figures listed. I forgot to put a "-" in front of the "-$1,874.32". So that would skew the math the other way. I don't know how that would be slotted in the negative though.
Ok, that makes much more sense then as far as the math goes then. So yes, I agree with what your dad said in your other post, it sounds like taxes and insurance probably rose this year and they underestimated, putting you pretty severely in the red. But seriously, the county is taking a 30% jump in one year? Is that even legal? That is an insane amount to increase in one year (unless property values have gone way up, but that isn't what it sounded like happened).
And I agree with your dad about the insurance also. It can usually be paid annually, or every 6 months, but it sounds like you paid it in December (no idea why that one was higher), then 4 months later, then the next month. Something seems wrong there. If your insurance is $1450/year (or so...I would attribute the $955 higher amount to the fee for splitting into 1/2 and 1/2 payments...there usually is a premium for that), then December and May could be right, if it was 1/2 and 1/2, but December, April and May seems wrong. If they made an extra payment, they should correct that, since that puts you ahead with the insurance company. Your insurer should be able to help you figure out what happened there.
Yeah it doesn't make sense for both the taxes to have jumped that much all of a sudden when it's been assessed pretty accurately the last 10 years (at least as far as when it's squared at end of the year). Add on top of that the insurance also seems to have jumped a large amount even with regards to me switching policy type. Thanks for the help again. It's given me the confidence that most likely something is amiss. I'll have to make some phone calls to see if I can sort out what's going wrong.
Lacerta, I didn't know there was usually a fee to split the payments. I should probably check on that. That's how it was automatically set up through the lender when I closed on the house 10 years ago.
Lacerta, I didn't know there was usually a fee to split the payments. I should probably check on that. That's how it was automatically set up through the lender when I closed on the house 10 years ago.
Well, they may not call it a fee for splitting the payments. Mine actually does the reverse and does a "paid in full" discount if I pay for the whole thing at one time. But it is the same effect. A fee for splitting or a discount for paying in full = the same result, whatever you call it.
And I don't know if every company does that. But every car insurance bill I've ever seen does that, so I would assume that home insurance would as well, since they are many of the same companies. And it is a logical reason why your December bill would be different than your May bill. But yes, definitely check on it.
Ok, thought I'd fill everyone in on what happened. I've sorted out some of the problems. My premium for the original homeowners policy was basically paid out of escrow the month before I canceled. So they were suppose to send a refund of the prorated amount for the previous policy. The problem is is that it hasn't come yet so my future escrow had to make up for that amount that was owed back plus the new policy amount. Also there was a problem where there was a delay (of nearly a month) that the policy was even registered at the mortgaging bank. I didn't know this until the 10th of this month when I got a letter about insufficient coverage (and the coverage docs came to them on the 11th). The mortgage company I think also factored in a higher amount for them to cover the insurance than what my actual policy with my standard agency is. The original amount for coverage was a little over $700 where my mortgage company would charge a gouging $1500 for their coverage if I didn't show proof that I had coverage! So all in all my taxes only went up only very slightly (they are actually paid off in full anyway through escrow every year) and the insurance for the different policy only went up by about $200 to $900 for the whole year. Which definitely makes more sense. Anyway, I'd like to again thank everybody that helped.
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