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I bought a house last January and am a little confused on how the escrow works. My property insurance and taxes are both included in my escrow and this year my insurance increased because I put my engagement ring on it and we had made a claim on our roof. It went up $50 a month so my bill just came and it is now almost $100 more, $50 for insurance and then $50 more for the escrow shortage. Does this make sense? Is it because you prepay the insurance so when I paid my monthly fee last year it now does not cover the increase in the rate this year? I am confused! Any help would be appreciated.
That is normal. They need to adjust up to cover next year's payment and for the payment this year so they double the adjustment to cover both years difference. Next year they will do it again and really every year that it goes up. You can pay the current year's difference in order to avoid the double increase if you want though, they should have sent you a letter that explains how.
Depending on when payments are made your escrow account could go negative with no consequence to you, if your insurance and taxes come out within a month or two of each other. You can avoid some of this if you proactively contact your lender when you get your insurance renewal statement but like I said there is no consequences for going negative in your escrow account.
What she said, but even if they over-deduct the extra cushion to cover next year, they are usually pretty good about using it as a credit next year, or send you a check for the overage once they do their escrow account reviews.
Yes ^. Sometimes they will overestimate what's needed, and they will credit you for the overage.
We insure for a house and large barn, and a rental unit on our property, so we had to add coverage and adjust our mortgage payment in the first year. A few years into our mortgage, I went through and re-evaluated our insurance and made some changes, and actually saved a significant amount. They credited the overage and our monthly payment went down.
What she said, but even if they over-deduct the extra cushion to cover next year, they are usually pretty good about using it as a credit next year, or send you a check for the overage once they do their escrow account reviews.
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Yes I bumped this post just for that.
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