December 29th, 2016 3:36 PM by Elizabeth Washburn
About this time
every year, your lender is obligated to review your escrow account to keep their
monthly bill in line with the actual insurance and tax costs. When they do this
evaluation, they send you a summary of their review and either a check, or an
opportunity to send them more money. If there is a deficit, they are usually
willing to either increase your monthly payment or allow you to send them a
lump sum. We are either gleeful for a
check for the post-holidays, or grimacing with the new larger house payment. Most of
us stop our evaluation here, however, I encourage you to read further.
What is the Mortgage
Your Mortgage Escrow Account is
established by the lender to pay on-going expenses while their loan is on your home.
These expenses generally include property taxes, home
insurance, and mortgage insurance. When you first established your loan with
the lender, most likely at closing, the lender set up a separate account consisting
of several months of your estimated taxes, a year’s worth of home insurance,
and maybe a month or two of mortgage insurance. Every month after that, you’ve
made on-going contributions with your monthly mortgage payment.
Evaluating your property tax bill
If you’re not already disputing your tax bill, the
next thing you want to check on your county’s website is your homestead
exemption, especially if there was a huge tax jump. Make sure it is in
place, and it is indicated on most tax bills as a percentage reduction in the
home’s taxable value. Is the air
conditioned square footage correct and correlating with your
appraisal? If not, you may be overtaxed.
If you are also eligible for the elderly
exemption, take the time to do it! You
might have to head to the local court house to present your tax returns, but I
have seen thousands of dollars unnecessarily spent because it was “too much of
a hassle.” My belief it that earning
those thousands might be more work than a trip to the local government office!
Evaluating your home insurance
opportunity to crosscheck what your home insurance bill is and what the lender
says it is. Get aware of any increase, or change in deductible, and shop it out
again if needed. I personally have had significant jumps over time and
saved bundles by taking the time to review annually, but it does take
time. Something that can’t be earned
Evaluating Mortgage Insurance
How is the equity on your home? Is it time to
call your favorite Real Estate Agent for their realistic value of your home? If you are encouraged, take the next step and
call the lender to see what items they need for verifying your value and ridding yourself of that old mortgage
insurance payment. Conventional
loans only need 20% equity. Old FHA
loans can get rid of the insurance as well, though you do need more than 20%
equity. Call to find out how much. The
changes in the FHA laws over time make it impossible to determine without
evaluating your exact loan. New FHA
loans have mortgage insurance for the life of the loan. A few phone calls and you will know what the
Examine your Interest Rate
Is your rate
competitive with the current interest rates?
If not, give me a call. We can fix that!
In summary, be
proactive with your bills like you are with your assets. I had one friend who confessed he had been
paying for a boat’s radio for 10 years after he sold the boat because the bill
was grouped in with other vehicles. Being proactive with debt allows you to not
only be aware of where your money goes, but also find the savings that are likely in the escalating bills we all
see every year.
fantastic and fiscally sound New Year!!!