this years annual escrow disclosure statement

July 2nd, 2008

This Year’s Annual Escrow Disclosure Statement

We bought our house at the end of January 2006, and last year was the first year I got an annual escrow disclosure statement.  Being a new homeowner, I didn’t really fully think through the fact that our escrow payment would probably change each year, and our monthly payment would go up – but it did.  Because we owe more than 80% of our home’s value, I don’t currently have the choice through our lender to handle the escrow account myself, and must pay into it each month to cover our property tax, homeowners insurance, and private mortgage insurance.

Last year I got an unwelcome little surprise.   Our property tax was more than the mortgage company had estimated, so our payments for the next year had gone up by a total of about $58 a month to account for the difference and make up the previous year’s shortfall.  So when I got this year’s statement in the mail, I opened it with, in a word, a bit of trepidation.  And I got an interesting mix of information inside.

Our escrow account is required by law to have a minimum balance of at least two escrow payments at all times, in my case about $300.  Apparently it is projected that after my property tax payments next April, our escrow account balance would drop to about $100, or $200 short of the minimum amount allowed.  Therefore, we have a projected shortage of $200.  Instead of spreading this out over the next 12 months as last year’s shortage was, the mortgage company is billing us all at once for it in our August 2008 payment.  So next month’s mortgage payment will be $200 more than usual.  However, after that, we get a nice little surprise.  The amount our payment rose last year was a combination of the rise in property taxes for this year, plus “paying back” the shortfall that we owed from our first year.  The shortfall part was about $33 of that $58 rise in payments, and that portion will then drop out of our payment for the next year.  So our payment as of September and until, I assume, next August, will be $33 less than last year.

So, we have to pay $200 more for one month, but then we’ll pay $33 a month less than we’ve been paying the past year.  That $33 a month savings will be my newest snowflake and go directly to our student loan payment.  That will, over the next year, add up to about $400 of snowflakes to eliminate our debt.  So it’ll be tight in August with the $200 extra to the escrow account that month but after that, the news in the letter was a welcome surprise.

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8 Responses to “This Year’s Annual Escrow Disclosure Statement”

  1. Congratulations on the $400 snowflakes. It is great when you realize that you are going to be able to pay off your debt faster.

  2. It’s interesting to see how different mortgage companies handle the accounts. We bought our house in Feb 2006. And we have gotten back money from our escrow account twice. Plus, this year our payments dropped almost $100. Still cant drop PMI yet.

  3. Escrow accounts are for the birds. I dropped ours as soon as I could. Much less complicated to pay your own tax and not have to deal with PMI.

  4. My credit union also required me to keep at least two month’s worth of payments in reserve – nearly $1,000. It was a happy day last May when I was able to cash out that escrow and start managing it myself.

    In the 5 years I’ve owned houses, my escrow was revised upwards every year due to my area’s tax-happy nature. Now that I am managing it myself, I’m not only making more money on it (3% vs 1%), I also have the option of withholding as much or as little as I like. (I’m actually withholding more as a way of forcing extra savings.)

    If you can find the means to pay extra toward your mortgage to reach the 80% loan-to-value mark, I think you’d be happy with result: self-managed escrow and no more PMI (basically giving away money to the bank with no benefit to you).

  5. paidtwice Says:

    July 2nd, 2008 at 5:00 pm

    Once the auto loan and the student loans are paid off, and we have a decent emergency fund, the goal is to get our mortgage to 80% or less of the house’s value. Now, by the time we actually get to the point we can start doing that, well, hmm, we might already be to 80% lol.

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

  7. oops! wrong post. please delete. thanks!

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