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.