Does anyone's mortgage payments go up due to escrow? help!

[buddy&wooz]

When we refinanced they underestimated the amount our taxes would be and seriously underbilled the escrow, so it went up a LOT the following year. In fact, it went up too much, so the year after that (current payments) we pay about $150 less per month!

I'm tempted to just pay the tax and insurance on our own, but it's two less bills to deal with, so I leave it as is.

 

[clh2]

We much prefer to pay our taxes & insurance ourselves, so we put approximately 1/12 of our taxes and homeowners ins. into a money market account every month.

 

[gm]

I knew I could count on my fellow diser's to help me figure this out.


This is our second year in this house and I am maybe going to ask them if I can pay the taxes on our own since me and hubby are pretty responsible with finances but do now know if our mortgage company will allow it since we did not put 20% down and are also paying the dreaded PMI because of that which is $73 which is also included in the total mortage payment. Our total taxes yearly are about $5700.

Thanks all

 

[snappy]

Homeowners insurance premium went way up last year, so we'll be paing for it this year. We do have a replacement cost policy which I am told is not that easy to even get anymore, so I guess it is worth it.

I got a quote from another insurer and their premium was even steeper.

 

[JerseyJanice]

That happened to us too in a big way!

The original mortgage we had included a clause in the contract that we HAD to have the mortgage company collect and pay our taxes and property insurance. The first several years, the mortgage was serviced through our bank, and we didn't have any problems then. Then the loan was sold twice.

The company we wound up with was a horror show (Dovenmuehl was the name of it). They came up with some convoluted formula of how much we had to pay to cover our escrow shortage, and it was a big increase. Something like $180 more a month.

A couple of years ago, we were able to refinance our mortgage with a 20 year fixed rate home equity loan. Property values went sky high around here, and we were able to borrow what it took to pay off our mortgage against our equity in the house. Technically, we no longer have a mortgage.

Now we escrow our own funds for taxes and insurance. Much better! And the really good part of having this loan is that we are no longer "pyramiding" our mortgage interest. Our principal and interest payments are equally divided over the 20 years of the loan. What this means is that in 10 years, we'll have a lot more equity in our home than we'd have gotten with a traditional mortgage.

 

[NCRedding]

It is not always the borrower's option as to escrow or not-it often depends upon the type of loan that you have. Some government insured loans (FHA, VA), require escrows for taxes and insurance. Other banks will only allow non-escrows if the loan to value is below a certain percentage.

My parents had a VA loan which they decided to pay off when the excrow payments exceeded the principal and interest payments.

 

[VW31]

I'm not a homeowner yet. I am in the process of researching, etc.
I have a few questions.

- If you have your own escrow that means instead of getting one bill from the bank with mortgage, insurance, tax payments included all in one you get 3 separate bills?

- How do you go about having your own escrow if the bank/mortgage company gives you that option? Do you just save the money someplace/anyplace?

- Exactly why is having your own escrow better than having a bank escrow?
Is there ever a time when it is better to have a bank escrow?

Thanks.

 

[Lisa L from MI]

If you meet certain criteria....you don't have to pay the PMI (which alot of people don't know about) and just pay your taxes/insurance seperately.....thats what we do...although I think it might be easier to have it all included

 

[Charade]

yep. It's a fact of life and it sucks.

 

[tiggersmom2]

My mortgage pymt has gone up every year due to escrow ( the insurance and the taxes not being calculated properly).

 

[Charade]

I'm not a homeowner yet. I am in the process of researching, etc.
I have a few questions.

- If you have your own escrow that means instead of getting one bill from the bank with mortgage, insurance, tax payments included all in one you get 3 separate bills?

- How do you go about having your own escrow if the bank/mortgage company gives you that option? Do you just save the money someplace/anyplace?

- Exactly why is having your own escrow better than having a bank escrow?
Is there ever a time when it is better to have a bank escrow?

Thanks.

Yes, it does that you get a mortgage bill and separate tax bills that you pay directly. The advantage to that is that your mortgage payment will remain fixed (unless you get an adjustable rate).

Some lenders require you to escrow the tax bills with them as basically an insurance policy so there's less chance that you would have a lien placed on your home by the local municipality.

There is nothing special about escrow account other than it being a separate account. You could set up a ING account (which earns a little interest) to hold your tax funds and then transfer them to your regular account when needed to pay the tax bill.

The only difference is discipline. You must remember to set aside enough (unless you make tons of money) money monthly to cover the tax bills when they are due.

 

[VW31]

Okay, and I'm assuming that the escrow that the bank holds for you doesn't acrue interest.

So do you get a tax bill every month, every quarter, etc?

 

[The Mystery Machine]

Yes, every year!

 

[disneygals]

The escrow account does accrue interest (not sure of the rates, but I know they're low!) I personally prefer an escrow account for taxes and homeowners insurance, it seems less painful to pay a monthly charge instead of huge checks.

 

[RitaZ.]

Okay, and I'm assuming that the escrow that the bank holds for you doesn't acrue interest.

It doesn't accrue interest.

So do you get a tax bill every month, every quarter, etc?

Every year in November we get a notice from the county notifying us that our mortgage co. has been sent the bill for our taxes. If your taxes are paid before the end of Novemeber, you get a small discount. I think you can pay your taxes as late as March, but the longer you take to make your payment, the higher the amount will be.

 

[Crankyshank]

Yep. My Mortgage payment went up about $75/mo due to a rather large increase in property taxes and an increase in homeowners insurance because the value of my house increased $90,000 in less than 3 yrs. My mortgage payment covers taxes and insurance as well as house payments.

 

[RitaZ.]

The escrow account does accrue interest

That's interesting, ours does not.

 

[brerrabbit]

The escrow accounts do earn interest. However they earn interest for the mortgage company not you. That is why most mortgage companies want you to let them escrow for you. While the amount of interest you earn at today's rates would be small consider it from the mortgage companies point of view. 100,000 customers escrowing 1/12 of their tax and insurance bill every month. Thats a lot of money and can mean significant money to the mortgage companies. In Texas where I live if you have paid down the loan 20% you are no longer obligated to pay PMI or mortgage insurance. Remember this is your loan value not the market value of your house vs what you owe. It should be that way but since the mortgage company and the PMI insurance company are usually one in the same they want you to keep paying. Always monitor your loan because I have learned from experience that if you don't tell the mortgage company that you have paid 20% of the loan they will continue to charge PMI till you tell them to stop. PMI insurance has your mortgage company as the benificiary and should you default on the loan they collect 20% of the original loan value to offset the costs they incur for foreclosing and remarketing your house. I received a large refund of escrow funds years ago because there was a class action lawsuit against my mortgage holder "GE Capital" where they lost a case because they were holding up to 20% over what my yearly tax and insurance costs were annually. I received almost $2,000 back.

 

[disneygals]

yep, I received a whopping 5.32 in interest for 2004. My bank is Wells Fargo.

 

[Ronda93]

Check your mortgage statement... The $1,250 likely include Principal, Interest, Taxes and Insurance. The PI should remain constant, but the TI can move around. Ours has gone up almost every year since 1997.

Most mortgage lenders want/demand to escrow the payments for taxes and insurance. It's for their protection. If the taxes don't get paid, they wind up second in line during a forclosure. Same with the insurance. A loss on the house becomes their problem instead of yours.

You can look forward to fluctuations in the TI components for years to come.