Small changes in your monthly expenses make a big difference. Yet another reason to get out of debt as soon as possible.
Last night I got a letter from our mortgage company. Apparently over the past 10 months that we’ve owned our house, we have been underpaying into our escrow account, because they underestimated our property taxes by about $300 per year. So as of February 1st, not only will our mortgage payment rise because we’ll be paying another $25 into our escrow account every month, we need to make up the shortfall from last year plus a little bit to raise our minimum amount in our escrow account to the amount required by law (2 escrow payments must be there held in reserve at all times according to the letter).
We get two choices on how to make up the shortfall. Either in the next ten days, we send the mortgage company ~$400, or we add another ~$33 to our monthly payment for the next year on top of the $25 it is rising already. Bringing the grand total to a $58 increase per month.
Well, I was none too pleased when I read the letter. At first I panicked, and then I settled down a bit and realized that we had options. I already snowflaked our windfall to debt (more on that in the Tell All Tuesday post later today), but our emergency fund of $1000 is intact (it is actually $1267 right now due to some of the extra paycheck not being spent) and if we needed to pay the escrow shortage now, we could.
We don’t know a whole lot about this type of stuff, so feel free to leave a comment correcting me, but it seems from the letter that paying for the shortfall over twelve months is the best option. We aren’t charged interest on our escrow account, and the monthly payment addition is exactly 1/12th of the total shortfall, so it seems like it is kind of like an interest free loan we pay off over 12 months.
I am so sick of debt I just want to pay the shortfall to make it go away, but it seems more prudent to just have our monthly payment increase to cover it and see where we are next year. At least we have options. Thanks emergency fund. But the increase in payments really stinks. Time to try and tweak the budget even more, and I hope my tutoring job starts soon. Really soon.