I Received a Refund Check From My Mortgage Company
…and I’m confused. I’m going to scrub the letter to make sure I understand everything before cashing the check, but any feedback/advice from experienced homeowners is greatly appreciated.
The letter is a review of my escrow. Apparently this is something done every 12 months. It lists my county taxes and hazard insurance for the year, then divided by 12. It shows an itemized summary of my escrow from inception, payouts, and a projection through December 2007. It has a summary of the “projected low point” and the “allowable low point.” The difference is what they call “overage,” which is the amount of the check…$510.85.
And here’s the kicker. A pleasant surprise, but I’m still shocked. Effective Dec 1st, my mortgage payment is going DOWN.
WHAT?
Umm
Ok
As you can tell, I’m new to this homeowner stuff. LOL
Comments, questions, feedback, advice…please.
~*~*~*~*~*~
Work to achieve, NOT to acquire.
And as always, BE fabulous!
~SM
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lucky you!! i used to always have a shortage, and had to give THEM a check.
basically they estimated what your mortgage insurance and property tax will be and tacked that onto your mortgage payment as a monthly payment. by november the actual rather than estimated payments are available. apparently they overestimated yours.
so not only are they paying you back from the past year, but they are reducing your monthly payments for next year so that they don’t owe you another check next november.
Don’t want to bring you down, but…I have to a tiny bit.
Sometimes when a property is purchased it takes the county a year or two to adjust the tax base for the property. This will in effect change your property tax due. This is assuming you purchased the property for more than the last assessment. Have you seen a bill? Check it out and if your taxable amount is 1/3 multiply it by 3 and add in any “live in” deduction you receive. My county is $5k. This would be what they say your home is worth.
Does it look comparable to what you paid? Higher? Lower? If lower, stick that money in a savings account until next years adjustment, then you won’t need to scrounge for money to pay the difference and your payment won’t rise too much.
Just a suggestion. I wouldn’t want to push my beliefs. LOL
Summer – Ahh, so it could have gone the other way too, huh? Gotcha! Thanks!
D – No prob. I needed the reality check. I want to understand the real deal. I’ll check the tax docs this weekend.
LOL @ “scrounge for money…” I haven’t done that in a long time. Ha!
If your payment is going down, I would recommend setting aside a bit more each month for additional taxes next year. If your bill goes up, your escrow account could be short, leaving you with a bill to pay and not much time to do it.
Also, keep in mind that property taxes must be paid by Dec 31 in order to be deductible on that year’s income taxes.
oh dayum all this homeowner stuff. sh*t I thought all you had to do was pay your mortgage and that’s it. I mean I knew about property taxes but that’s it. thanks ma! so when we do finally buy a home I’ll have a REAL idea of how things are in life and not a “reality television” version.
Am with aly cat 121, thought you just had to pay the mortgage and call it a day.
Single Ma, thanks for really putting yourself out there like that. You will never know how much people like me are learning from your journey.
My guess is that when you bought your house in April, they overestimated the annual taxes and/or insurance and as a result you overcontributed to your escrow account.
As others have said, it takes a couple of years for the whole escrow thing to shake out. When I purchased my home same thing happened – mortgage company sent me a refund check and adjusted my payment down. Year 2 the opposite happens, company sent me a bill AND raised my monthly payment. I am now into year 3 and things this time seem to have settled down, payment adjusted down a couple of dollars and small refund check arrived.
I figure that by year four things might finally stabalize – but then I am sure something will happen to change the math again (insurance rate increase or tax increase).
Enjoy the rebate while you can :)
Get used to it. I’ve gotten checks for overages as well as having to send them money for underages or have my mortgage increased. I didn’t get it either – the first time so I did what you did – put out a call to some folks in da know.
In four years, I’ve never had an overage … just shortages and my mortgage goes up.
Your mortgage and interest payment will always stay the same assuming you have a fixed mortgage. But, your escrow account can and will fluctate based on your homeowners insurance, property taxes and PMI if you have it. Ours is going down slightly this year but I remember one year it went up significantly due to a major increase in our property taxes and homeowner’s insurance (which nearly doubled in ONE YEAR).
JLP
AllFinancialMatters
Hey Lady, Check your jurisdiction. VA changes property tax assessments every year and the bank adjusts the escrow payment because of it. Mine has been steadily rising and requires an extra $100.00. This year I am hoping with flat real estate prices, I won’t have to kick in extra for escrow this year.
Good luck! (Hey, this is the sort of thing that an emergency fund is for! Put your check there! *winky*)
Good stuff! Thanks for all the feedback.
Taking notes…