I received a letter today from my mortgage company. Here's an exerpt: We have completed this year's analysis of your account. There is a shortage of $5216.05 in your account. You new total monthly payment effective March 1, 2004 is $1948.61. It went on to explain the increase in my mortgage insurance, hazard insurance, county tax, school tax and mud/utility. It is a combined increase of $602 per month. This has hit me like a ton of bricks and I'm anticipating a diet of macaroni and soup for the foreseeable future. I've only been in this house for 2 years and am still green when it comes to some mortgage matters. My question: Is this common? Can I expect any more surprises?
Dude, that is *beyond* scary. Wow. I'd call the mortgage company ASAP and ask WTF? It might just be an error somewhere, or a misplaced payment. Could just be a very simple mistake somewhere. Hope it works out for you, man. Good luck.
This is almost certainly for real. The problem is that your mortgage company didn't escrow enough funds for the taxes mentioned. They projected the amounts for those taxes and for some reason (almost certainly because the taxes were increased this year) the projections were short. This happens quite often, but it's not usually that large of a figure.
The most common reason for an increase is a raise in your appraisel, causing additional taxes, or a raise in insurance. A bump in tax rates would not cause that big of a jump. Another reason is a shortage in your escrow (I assume you have an escrow account.) Your escrow account is audited yearly, and if there is a shortfall to cover insurance and taxes, then the mortgage company will raise your escrow payment to cover. Having said that, that is the highest increase I have ever heard of. Mine went up about 40 dollars due to insurance increases and a higher appraisal
You know, if mortgages can be misleading like that, can't banks or mortgage companies mislead a potential lender by just assuming very low escrow and then jacking up the price when they feel it's neccessary?
According to the letter these are the increases: Mortgage insurance up $93.70 per month Hazard Insurance up $139.67 Countay tax up $47.83 School tax up $169.76 MUD/Utility up $151.82 Total: $602.78 per month. Sucks any way I look at it. I live in Fort Bend County btw.
You could ask the mortgage company if you are elgible to pay your taxes and insurance outside of escrow. It does not change the amounts, but it delays the big increase in taxes until the tax come due. We did this one time. Our escrow went up $100 a month. We saved most of the money on the side in a savings account. The taxes were due sometime in February and our income tax return came in at the same time. Their estimate was a little high, so we did not need the full $100.
Those are some huge increases. You need to contact your insurance company and find out if your yearly insurance premium actually went up $1664. I doubt it did. Sounds like your mortgage company blew it when they estimated your escrow amount when you closed. By comparison, my hazard insurance is only $1600 a year total. To have increased by that much is not right. I wouldn't call it misleading, just bad accounting. Mortgage companies do not make money off escrow accounts, so deliberately assessing a low escrow only to jack it up later would not make the mortgage company any more money.
Thanks for all the comments. I will be on the phone first thing Monday to try to get a handle on all of this. I'm surprised I didn't have nightmares last night.
Really, if they can screw you big time like that, what's the point why not rent? Tell me some advantages of buying a house over renting, please.
EXACTLY! Man, I'm in the market for a new house up here in the Dallas 'burbs and that about freaked me out. He went from paying a mortgage to paying a mortgage and a half. Do I really need a big-screen tv and large aquarium that bad???
The main reason being, you actually own something as you pay for it. You pay for your apartment for decades and really have nothing to show for it. Tax breaks. A house mortgage can be cheaper than rent on a month-to-month basis if you go the 30-year mortgage route, too. Some people just want more space than an apartment can provide. They want a yard. They want their own garage (of course you can rent a garage, too, in some apartments). Your neighbors also aren't up against you on every wall. http://www.ces.ncsu.edu/depts/fcs/housing/pubs/fcs426.html
What part of Dallas? I'm just curious cuz that is where my girlfriend is from. I'm considering looking at buying a house sometime next year here in Austin, but this stuff about taxes and escrow accounts is scary to a home buying newbie.
I always figured the part of people actually wanting to own something.What sort of tax breaks do you get? What other kinds of plans are there besides the 30 year plan because that's the only one I've heard of? Oh yeah, I wasn't talking about renting an aprtment I was talking about renting a house but I pretty much know what the downsides are to that now.
Mortgage Insurance should never go up. It is esablished at the time of the loan. Once your loan is down to 80% of the value then mortgage insurance it will go away completely. If it went up, then they screwed up at closing. If you put down 20% or more, then you don't even have to pay mortgage insurance.
Just a couple of the small things I know about this stuff... I know that in Harris County, property tax appraisal amounts are capped at 10 percent per year. So, if your appraised value last year was $100,000, the VALUE of your home cannot increase beyond $110,000 for next year. I also believe there is a "relief" year every five years meaning that year there cannot be an increase in appraised value. I also remember reading that you can receive injunctive relief against large increases. You should call the mortgage company first and then if all else fails, I believe there is a state board that regulates those types of things. Mrs. JB and I are fortunate in that we paid enough down on our home to not have an escrow account. It sucks that, thanks to THEIR mistake, you get screwed.
As someone smart mentioned, try to get your tax and insurance out of escrow, to pay them yourself. Look for a cheaper home insurance. It pays to shop. Get less coverage, if affordability is a problem. Group auto and home and use discounts. Expain to the agent(s) you need it cheap. Try to cut your property tax appraisal. Hire a good firm to do it for you. Burr Wolff, RETS, O'Conner, and others will do it for 33% of the savings. They advert 50%, but you should be able to knock that down, esp. if you group the protests with some other people. You can protest yourself successfully, but they have better data. I'm an appraiser, but I use a Burr Wolff. They just do a better job than I would, I have to admit. I also know too much, and I'm not a good liar. Check you mortgage balance to see if you have acquired enough equity to drop the PMI. They won't drop it for you. Find out the threshold, and try to get there. Ask for a copy of the escrow reconciliation. Check to see if the accruals are appropriate going forward. Best of luck.
