In a PITI payment are all four portions normally paid as a lump sum to the mortgage company which then sends the accumulated insurance payments to the insurance company once a year and the accumulated tax payment in accordance with the county's billing period ? And if so what happens when the mortgage is paid off ? Shouldn't the mortgagor refund all prepaid property tax and insurance premiums to the homeowner on the day the mortgage is 'satisfied' ?
Property tax is paid in arrears, not prepaid. So the tax you pay in 2014 is for your 2013 property taxes. Insurance is usually prepaid, but I don't know how often the mortgage company makes payment, it could be anything I guess. Personally, I pay my insurance monthly. When the mortgage is paid off you contact the mortgage company and get the payoff amount as of a certain day (usually your closing day, if you're selling the property). If there is anything left in your escrow account after that day, the mortgage company sends it to you as a check, usually within a month.
Robert, it depends on the time of year as to what a mortgage company does with the excess payments. If the taxes or insurance is due at the time of your payoff, they would take your escrow and pay the bills one last time, and send you any monies left. If say fo example those bills aren't due until six months after you paid off the mortgage, then they should send you the monies in your escrow account.
It just largely depends on what your mortgage company's policy is in this area. As, for the time frame of them cutting a check to you, expect 2-4 months before you see the money. Remember mortgage companies have a huge problem with inter-office communication. The mortgage department may take a while to notify the refund department.
@Jean Bolger Taxes are assessed in arrears, however after the first year, mortgage companies estimate taxes and try and collect ahead of time. This is why you see mortgage payments jump $400-$1000 or more on newly built homes in the first couple of years.
Thanks Jean and Richard.
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