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Leshaface
01-24-2012, 12:40 PM
We received almost $500 yesterday from our mortgage company saying we had an overage in our escrow account. We're not really sure what to do with the money. Should we apply it all to the principal or do half to escrow for home taxes this year and the other half to principal? Or do something else like put it in savings?

What would you do?

Doofenshmirtz513
01-24-2012, 01:01 PM
I'd probably just put it in my savings account, or you could pay down whatever your highest interest rate borrowed money is (whether mortgage, credit card, auto, student loan, or otherwise), or you could even splurge on something. You shouldn't need to put half in escrow, though; you already got money back because your escrow payments were in excess of what was needed to cover taxes and insurance. In theory, your mortgage company has accounted for the future payments to come out of the escrow account and adjusted your mortgage payment accordingly (hopefully downward :thumbsup2).

puffkin
01-24-2012, 01:09 PM
We got about $1500 back last year from Escrow overpayment and we sunk the money back into some home repairs we had been holding off on. New carpet in the one room and some electrical work we wanted done.

Most will say to throw it against the principle or in savings.

Leshaface
01-24-2012, 02:49 PM
I'd probably just put it in my savings account, or you could pay down whatever your highest interest rate borrowed money is (whether mortgage, credit card, auto, student loan, or otherwise), or you could even splurge on something. You shouldn't need to put half in escrow, though; you already got money back because your escrow payments were in excess of what was needed to cover taxes and insurance. In theory, your mortgage company has accounted for the future payments to come out of the escrow account and adjusted your mortgage payment accordingly (hopefully downward :thumbsup2).

Didn't know this. I guess I'm afraid of there not being enough in our escrow account to pay for one of the tax bills that will be coming up in April, and we'll end up paying out of pocket for it.

Thanks!

We got about $1500 back last year from Escrow overpayment and we sunk the money back into some home repairs we had been holding off on. New carpet in the one room and some electrical work we wanted done.

Most will say to throw it against the principle or in savings.

Wow! That's quite a bit you got back. Thanks for the suggestion!

scrapquitler
01-24-2012, 02:49 PM
We received almost $500 yesterday from our mortgage company saying we had an overage in our escrow account. We're not really sure what to do with the money. Should we apply it all to the principal or do half to escrow for home taxes this year and the other half to principal? Or do something else like put it in savings?

What would you do?

When we have an overage, our mortgage company sends us a letter asking us what we want to do before they send the check. We always have them leave the excess in the escrow account and apply it toward next year's escrow payments. As a result, the escrow portion of our payment decreases by 1/12 of whatever that balance happens to be (and therefore our monthly payment is lowered).

puffkin
01-24-2012, 03:04 PM
Wow! That's quite a bit you got back. Thanks for the suggestion!

Yes it was and it is a HUGE reason we do not escrow anymore. We had appealed our home assessment in 2009 and got it lowered resulting in our real estate taxes going down by about $1200/year effective in 2010. However even though we called our Escrow account would not adjust until 2011. So we overpaid by about $100/month in 2010. During 2010 both my DH and I lost our jobs (me for 6 months, him for 10 months) and trust me, that $100/mo would have come in handy to pay some other bills. Thankfully the end of 2010 brought us both employment and we got back on track financially and were even able to refinance our mortgage in 2011 to a great rate and down to a 15 year.....that is when we decided we liked having control over our own money and we elected to not continue escrowing.

got2sammies
01-24-2012, 03:11 PM
I would call your local tax office to make sure you mortgage company has indeed paid all the taxes to date before doing anything with the check...Just to be sure....
Think about this: if you dont escrow your monthy payment will be lower per month. Figure out how much money you would/should be paying into an escrow account and place that money into an account you do not touch until taxes are due(in my case quarterly). You are earning interest on your money not the mortgage company (I know its hard and the interest is not much but every little bit helps)

scrapquitler
01-24-2012, 03:38 PM
Figure out how much money you would/should be paying into an escrow account and place that money into an account you do not touch until taxes are due(in my case quarterly). You are earning interest on your money not the mortgage company (I know its hard and the interest is not much but every little bit helps)

I earn the interest on the money in my escrow account. The interest is added to the balance of my escrow account every year, and I am issued a 1099 by the mortgage company so that I can pay income tax on that interest income every year.

eyor44
01-24-2012, 05:23 PM
Congrats on the refund. If you don't immediately apply it back towards your mortgage, you are very smart to at least keep it in savings just in case there is an increase next year.

Leshaface
01-24-2012, 06:53 PM
I would call your local tax office to make sure you mortgage company has indeed paid all the taxes to date before doing anything with the check...Just to be sure....
Think about this: if you dont escrow your monthy payment will be lower per month. Figure out how much money you would/should be paying into an escrow account and place that money into an account you do not touch until taxes are due(in my case quarterly). You are earning interest on your money not the mortgage company (I know its hard and the interest is not much but every little bit helps)

This is a smart idea. Thanks!

lovemylife
01-24-2012, 08:18 PM
My DH and I just received a small refund check also (just bought the house in May) and 2 days ago recived a letter that they were increasing our payment by $10/mo due to possible increase in taxes. If they were going to refund us money, why didn't they just keep that and reduce our payment increase? Doesn't make sense to me.

IDoDis
01-24-2012, 09:02 PM
My DH and I just received a small refund check also (just bought the house in May) and 2 days ago recived a letter that they were increasing our payment by $10/mo due to possible increase in taxes. If they were going to refund us money, why didn't they just keep that and reduce our payment increase? Doesn't make sense to me.

The same thing has happened to us for the past 2 years. We've gotten money back and then the next month they increased the escrow payment for the next year, thus increasing the overall mortgage payment. I don't get it. :confused3 Why not just keep the extra vs giving it back and then INCREASING our payment for the next year? This year we got back $280, but then our mortgage payment went up $8 per month.

Our mortgage is with Wells Fargo.

sbell111
01-25-2012, 08:52 AM
I would do the same thing with the escrow overage that I would do with any other $500 that landed in my hands. For me, it would go to fixing up our house to get it on the market. Others might put it toward their bills in whatever order they are being paid off, apply it to their mortgage principle, take a trip, toss it in the bank, whatever.

jgates
01-25-2012, 05:54 PM
A lot of that is determined by law. The escrow was calculated for the defined time period. Since it was overpaid, you need to receive it back. But escrow also has to be recalculated each year, so they need to go based on assumed increases etc. I am not sure if it Federal or State based with the variances in laws. If a loan is paying off, you can't even offset a pay-off with the escrow. It has to be calculated independently (at least in our area).

One thing that is irritating from the lending side -

1- pay the customers home owners insurance (and depending on cr rating this can be several hundred or $1000).
2- Customer then cancels this insurance and receives a refund themselves.
3 -Customer gets new insurance but doesn't pay the premium from the refund they already cashed & blew on something else.
4 -Bank has to 'overdraw' the escrow account to pay the insurance
5 -The next year then the customer has to have a hefty increase in their monthly payment because their account was 'negative' because of having to pay insurance 2x.
6 - The customer calls & yells at bank because payment increases significantly on escrow because the shortage is still there & not enough for taxes, etc.

You get the picture & YES it happens way more often than it should.

I'll get off the soapbox now..................