Apologies in advance for the lengthy post, I appreciate any help on this.
So we purchased our house at the end of 2021 (first home). We have been paying $3,500 a month for our mortgage, of which $2,500 goes to principal/interest and just under $1,000 goes into escrow for property tax, homeowner’s insurance, and mortgage insurance.
We just received a letter stating that our monthly payment will be increasing from $3,500 to $5,500. It appears two things are happening:
Escrow Payment: Our escrow payment is increasing from $980/month to $1,600/month. This is due to significant increases in our property taxes and homeowner’s insurance.
Escrow Shortage: We are being asked to pay a total of over $15,000 additional into escrow to make up for a “shortage.” This can apparently either be paid in full or divided over 12 months as $1,300/month.
I checked the tax record, and the tax assessed value of the home increased from $336,000 in 2021 to $660,000 in 2022, which is why our taxes doubled. This seems crazy, but the new assessed value is in line with what we paid for the home, and it is in South Florida. Is there anything we can do here?
Our homeowner’s insurance also increased from $4,400/year to $6,600. Again, South Florida. We shopped around but there were no other options we found.
Those two things I understand and there doesn’t seem to be much we can do about that. But these changes alone would only increase our payment from $3,500 to $4,100.
It is the shortage that I am struggling with. Our escrow account currently has $4,000 in it. I understand that when property tax and insurance are pulled out in November, the account will be drawn into the negatives, since it appears these are pulled out for the entire year at one time. However, as we continue to pay the updated escrow payment, this would build back and we would end the year with the same $4,000 we have in there now.
If we do what they’re asking and pay the additional $1,300/month, we would end the year with almost $20,000 in the account. Either way, our escrow payments this year will cover all of our costs. But we either end the year with $4,000 in our account or nearly $20,000.
The amount they are asking us for was calculated by taking the difference between the minimum (negative) balance our account would reach, and their “reserve threshold” which is around $3,000.
I do understand that they are trying to avoid a negative balance on the account, even though it would be temporary and we would end the term with a positive balance. What I don’t understand is, if we pay the shortage over 12 months, the account is still being drawn into the negatives. The only way we would stay over the reserve threshold is if we add the full shortage amount upfront.
Why would we be required to add this much money? I don’t entirely understand why we would be required to park almost $20,000 in the account, when that money isn’t actually being used to pay for anything. Or is this all a year behind? Also, if we do this, are we able to withdraw that money at any point?
Submitted September 26, 2023 at 12:30AM by Dingle_Dangle_Darko https://ift.tt/GBwgc5q
