Homeowner's Insurance Question

[dtr_angel]

2 weeks ago I switched our car insurance and homeowner's insurance. We don't actually pay the homeowner's, its in escrow. Our policy just started on 1/29 for the year... I assumed that State Farm would return the money to our mortgage company, but instead we got a check for almost the full amount. Our mortgage company customer service seriously sucks, and it's Saturday anyway so I can't get a hold of them until Monday. I was thinking we'd just cash the check, and write out out to our mortgage company and put it back in escrow? I really thought saving $300/year was a good thing but this has all been such a headache so far!

 

[TxRabbit]

2 weeks ago I switched our car insurance and homeowner's insurance. We don't actually pay the homeowner's, its in escrow. Our policy just started on 1/29 for the year... I assumed that State Farm would return the money to our mortgage company, but instead we got a check for almost the full amount. Our mortgage company customer service seriously sucks, and it's Saturday anyway so I can't get a hold of them until Monday. I was thinking we'd just cash the check, and write out out to our mortgage company and put it back in escrow? I really thought saving $300/year was a good thing but this has all been such a headache so far!

When you switched your homeowner's insurance, how did you pay for that? How is the insurance instated?

 

[Cheshire Figment]

If you paid for your new homeowner's policy the refund from State Farm is your money to keep. Effectively it is making the new payment for you.

What you do need to do is let your mortgage company know who your new insuror is, and how much the policy cost you. They may make an adjustment to the escrow analysis. The big thing is they will have to be able to make the payment when your new policy is up for renewal next year.

 

[southtexasmom]

This happened to us a few years ago when we changed insurance companies. I just deposited the check and wrote the mortgage company a check and put a sticky note on it that said "Escrow Payment", I made sure the sticky note was covering the amount of the check so it had to be removed to process..

 

[seashoreCM]

No problem cashing/depositing the check from your insurance and writing a bigger check for next month's mortgage payment with extra money earmarked for escrow.

It is not important for the lump sum from the old cancelled insurance to go straight to your mortgage company for escrow unless you are sure there is a shortfall for paying the property tax. When you began the new insurance, you paid it up to date. The mortgage company does not need a big lump sum to resynchronize your insurance. Any required future installments will match up with your regular mortgage payment month by month, give or take a coupl'a dollars, most likely requiring fewer dollars per month since you probably changed insurance companies to get a lower premium.

 

[dtr_angel]

to answer the question, when I switched, our new yearly insurance was $x81, so I made a credit card payment of $81 to Geico (new insurance) as a deposit, and the balance would come from escrow. We just got our escrow account analysis the week that I changed insurance, and our escrow account is short because we just bought our house last year and only paid mortgage payment for 9 months instead of 12. We paid for a full year of homeowners insurance up front when we bought our house, and I'm assuming the mortgage company already paid for the full year starting 1/29/10.

When we called the mortgage company to tell them we were switching, they said we couldn't do anything over the phone, they had to wait to get the info from Geico. We got our big packet from Geico this past week so I'm guessing our mortgage company should have whatever they needed by now.

I made a copy of the check from State Farm (old insurance company), and copies of the paper from Geico showing we are insured and will cash the check, and write out a new one to the mortgage company and include that. Tomorrow is a holiday so I will try to call them on Tuesday before I mail it out.

This is all so confusing!

 

[RyJMom]

Use the money State Farm sent you to pay the new insurance company. The new insurance can bill any balance after that to your mortgagee.

 

[Cheshire Figment]

1. Your mortgage company will normally pay only one Homeowner's Insurance per year.
2. They paid SF.
3. You got a refund from SF for the overpayment on cancellation.
4. You only paid a deposit to GEICO
5. You need to pay the balance to GEICO
6. Your mortgage company will collect from you as part of your monthly payments and will pay GEICO next year.
7. Get this completely straight before you send a separate insurance check to your mortgage company or it will mess everything up.

 

[TxRabbit]

1. Your mortgage company will normally pay only one Homeowner's Insurance per year.
2. They paid SF.
3. You got a refund from SF for the overpayment on cancellation.
4. You only paid a deposit to GEICO
5. You need to pay the balance to GEICO
6. Your mortgage company will collect from you as part of your monthly payments and will pay GEICO next year.
7. Get this completely straight before you send a separate insurance check to your mortgage company or it will mess everything up.

This is very good advice.

I would not expect your mortgage company to pay Geico. You need to cash the check from State Farm and use that money to pay Geico. If you are saving money with Geico, then the SF check should more than cover the amount.

I find it strange that there is a shortage in your escrow account. Even though you only made 9 payments, when the account was established, there should have been a requirement as part of closing for you to deposit the shortage up front. That is, there should have been reserves required as part of closing.

If there is a shortage in your escrow, you will want to send in extra funds to make up the shortage asap. This is the only way that you will avoid an increase in your mortgage payment. If you decide to NOT make up the shortage at this time, your mortgage payment will see a significant increase. It's weird like that, but the increase will be more than you anticipate. Had this happen to us in the past when certain taxes hadn't yet been accessed on a new property. When they finally were accessed, we had a shortage in escrow. Unfortunately, we couldn't make up the shortage and the increase in the mortgage payment more than made up for the shortage. Those mortgage companies have a minimum balance that they like to maintain, so the shortage will only be a reflection of what they really want. The shortage will reflect against a zero balance, however, they will want a minimum balance, so you will see quite a difference in you payment if you don't respond to that letter.

 

[a1tinkfans]

Wish Geico had HO ins in our area...we are Very happy with auto......

 

[kathie859]

An escrow shortage can occur when buying a home if the purchase price causes the property tax assessed value to increase. Lenders cannot anticipate the increase but can only build the escrow account using the current tax bills. It's annoying but common and the loan officer should have explained this.

 

[ctinct]

Is it common to have insurance included in your mortgage payment? Here in Connecticut, I have always paid mine separately. I wonder if this is a state thing or a bank thing. My mortgage is with a smaller community bank.

 

[kathie859]

Is it common to have insurance included in your mortgage payment? Here in Connecticut, I have always paid mine separately. I wonder if this is a state thing or a bank thing. My mortgage is with a smaller community bank.

I truly don't know the percentage of mortgages nationwide which include escrow. At the bank where I work (which is a large regional bank), if a person has a LTV (Loan to value) ratio higher than 80%, escrow is required for taxes. Most people choose to have the Homeowner's insurance included, too. Under 80% LTV escrowing is optional.

I believe that the escrow requirement is set by individual lenders.

 

[scrapquitler]

Is it common to have insurance included in your mortgage payment? Here in Connecticut, I have always paid mine separately. I wonder if this is a state thing or a bank thing. My mortgage is with a smaller community bank.

I'm in CT and our homeowners insurance has always been part of the escrow portion of the mortgage payment. I think it's a bank thing.

 

[dtr_angel]

I just wanted to thank everyone for answering all my questions...

I finally got to talk to someone at my mortgage company, and I could've done it either way, but I went ahead and called Geico and paid the remainder since I have the refund from State Farm, and I'll write a check out for the difference and send it in for escrow.

I don't know a lot about why our escrow account was short, I thought it was because of not making payments for the full year but I think it has something to do with taxes going up, plus our homeowners insurance from State Farm increased and they had to make up for that too. The joys of being a homeowner!

 

[Swimalie]

I'm in CT and our homeowners insurance has always been part of the escrow portion of the mortgage payment. I think it's a bank thing.

It's a bank and a equity thing. If you don't have enough equity in your house, the lender will usually require you to have escrow. Some lenders, no matter how much equity, will require you to have escrow. I will not take a loan with the later. I pay my own insurance and taxes so that I can control the price and payments more.

 

[TxRabbit]

I just wanted to thank everyone for answering all my questions...

I finally got to talk to someone at my mortgage company, and I could've done it either way, but I went ahead and called Geico and paid the remainder since I have the refund from State Farm, and I'll write a check out for the difference and send it in for escrow.

I don't know a lot about why our escrow account was short, I thought it was because of not making payments for the full year but I think it has something to do with taxes going up, plus our homeowners insurance from State Farm increased and they had to make up for that too. The joys of being a homeowner!

Just for your own piece of mind, you should verify that your taxes went up, since you know that your homeowner's did. You should have still received notification of your property tax value, even if your mortgage company pays it. This would give you the opportunity to protest the assessed value of your property. And this is something that you may want to consider, especially in today's market.

It's also possible that your taxes also went up, in terms of percentage amount charged. There would really be nothing that you could do about that.