my escrow account made me happy for this year

June 8th, 2009

My Escrow Account Made Me Happy, For This Year

Our mortgage is still more than 80% of our home’s value (and a higher percentage every day it seems, as the value of our home plummets, but that’s another story) so we’re required by our lender to have an escrow account through them to pay our homeowner’s insurance and property taxes.  This isn’t a big deal, except that I’d rather handle the money myself, but I am patient enough to wait until we get our mortgage paid down to the appropriate level.

In the past two years since we’ve owned our home, we’ve had our monthly payment adjusted upwards twice from its origin due to projected escrow shortages.  There is a minimum balance required in our escrow account, and if our property taxes or homeowner’s insurance is higher than the bank expects, the minimum balance drops too low and then we have to put more money in (which is what raises our monthly payment).  It has never been a huge upward increase in our payment, but it has so far always been up.

So this year when I got the annual letter from the mortgage holder, I was less than excited.  But when I opened it, my tune changed immediately.  Not only does our monthly payment go down for the next year by $43.66, we also got a check for $996.86 because we have too much in our escrow account.  Our property taxes have gone down by over $500, which is where the escrow overage came from (the good side benefit of lower property values, I guess).

We discussed what to do with the unexpected windfall, both the check and the monthly mortgage decrease, and we’ll be putting both towards my student loan.  So this month I’ll be paying $1496.86 towards the student loan, and every month after until it is gone I’ll bump the minimum we pay up by $43.66.  We discussed the idea of putting it towards our mortgage principal since it came from the mortgage company, but decided we’d rather keep concentrating on that last non-mortgage debt and make it go away as fast as possible.

Sometimes the readjustment letter has good news, after all.

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15 Responses to “My Escrow Account Made Me Happy, For This Year”

  1. Nice! Glad you got that little boost. I look forward to seeing your updated debt numbers in the future!

  2. Great news! I remember when that first happened to me in my condo, I got a check for around $700! Good work on applying it to another loan payment!

  3. I love it when things like that happen!

  4. Nice windfall! That should take a bite out of that student loan.

  5. this sounds amazing! i’m crossing my fingers this happens to us too! hah! (or at least the lower payment)

  6. This happened to me as well. I did not know it could happen, but I appreciate the check :)

  7. Jennifer B Says:

    June 9th, 2009 at 9:45 am

    We’ve had a similar change to our mortgage payments every year for the last 8 year’s we’ve been in the house. Property taxes change, the valuation of your house changes and every year they feel the need to re-jigger the account. After the first couple of years the amount it changes isn’t so significant – I think this year our payments are $4 lower than last year. but then next year they’ll be $5 higher than this year.

    Glad yours was a windfall for you this time!

  8. Wow, that must have been a nice surprise!

    Our payment went up last year for the same reason. It didn’t increase by *too* much, but it was still a little disappointing.

  9. Yay! I’m so happy for you! I got a mortgage-related windfall last week. My mortgage is with a credit union and they paid me $160 in member dividends – which I really wasn’t expecting. Not nearly as big as yours BUT I just had $160 worth of repairs I needed to do on my house the week before, so it was nice to be able to put that amount back into my EF.

  10. Between Prop 13 and our long ownership, we haven’t had to worry about escrow for several years. I do remember what a shock it was when, after electing to close the escrow account, our *first property tax bill came. We hadn’t set aside nearly enough, and it was a bit terrifying to contemplate.
    *They were previously sent to the escrow/mortgage company -I think ;-) .

    We still have to consciously save for this bill, and it is a chunk!! Luckily we can make it in two installments, and [with Prop 13] the amount is predictable.
    When watching shows about new homebuyers, I’m always talking back to the TV about “remember property taxes! remember insurance!”. Many don’t appear to factor in those omnipresent bills. Makes a difference– and really, you can only tax deduct a percentage basically equivalent to your tax bracket. No great bargain.

  11. debtheaven Says:

    June 9th, 2009 at 6:53 pm

    That’s fantastic! The best news is, that extra $43.66 should mean that every two months, you see the first figure go down. That is so motivating! I can’t wait to see the update figures!

  12. We refinanced last year with a local bank and they don’t even HAVE an escrow department! Our taxes are due twice a year and this time we’ve actually saved for that – LOL! Our house insurance is on a monthly deduction so that’s just a regular bill. Congrats on your payment going down and on being smart enough to just put it towards the debt.

  13. OOooh, I had the opposite – even though home values are going down, here in TX prior years’ tax increases have been kept to 10% because of our homesteading legislation, so the appraisal district used this year to catch up those gains they haven’t been able to collect over the past 5 years I’ve been in the house… I’m now appraised at 110% of what my home might sell for if I were lucky. so I have an escrow shortfall of about $1000, which I could pay in lump sum or by my payment increasing from $1216 to $1300. YUCK. Good choice on what to do with your windfall, though – that must have felt nice, seeing your loan principle drop so much this month!

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