Escrow account - insurance refund due to changed insurance (mortgage, mortgage company, rental)

[Zarick]

So I changed insurance on my rental mid year to a better company. My mortgage company had already paid my first insurance and then in December sent another check to my new insurance. The old closed insurance just sent me a refund for the remaining balance.
Do I send the refund to my mortgage escrow? Do I just hold onto it until someone asks for it? Will my mortgage company send me an evil letter?
I asked my mortgage company and they had already re-calculated the new escrow before I changed insurance. So the loss of the extra money is not built in.

[GeorgeJ.]

Originally Posted by Zarick

So I changed insurance on my rental mid year to a better company. My mortgage company had already paid my first insurance and then in December sent another check to my new insurance. The old closed insurance just sent me a refund for the remaining balance.
Do I send the refund to my mortgage escrow? Do I just hold onto it until someone asks for it? Will my mortgage company send me an evil letter?
I asked my mortgage company and they had already re-calculated the new escrow before I changed insurance. So the loss of the extra money is not built in.

I don't see that you need to do anything. Your mortgage company may raise your payment because of the extra insurance payment they made, but if your company is like Citi, they would give you the chance to make a bulk payment to keep the amount going to the impound account the same; you could use your insurance refund money to make that bulk payment later to keep your payment the same.

I had the same thing happen on one of our rentals. State Farm raised the rate on it up to $1000 a year; I switched to another company that only wanted $400 a year. But the mortgage company had already paid State Farm for the renewal. So State Farm sent me a refund. Then the mortgage company decided that they would pay the premium on the new insurance company too. So the new company also sent me a refund. I'm sure that the mortgage company will raise the payment way up next year because of the double insurance payments, even though the new company is less than 50% of the old insurance payment.

[FalconheadWest]

If you don't replenish your escrow account, you'll get a notice at the end of the year stating your escrow account was short and they will now charge you $X per month to make it up. The problem with that is they aren't going to ask you why it's short, they're going to just use their calculation that it needs to be made up, so you will end up making payments way over the amount it's short until the next year after that they recalculate again and realized they collected too much. It's a cycle. I would go ahead and replenish your account so you don't pay extra the next year.

[jackmichigan]

Why don't you just contact the escrow company to see what they would prefer?

[Zarick]

Okay.. thanks guys.. I will ask the escrow company.