Escrow: why don't I understand it?

Question

Anyone in here care to educate me a little on escrow? My escrow account keeps coming up with what seems like fairly large shortages.I'm not very good with math, and I've tried going over the escrow statement with my mortgage company, and I've walked away even more confused. To make matters worse, I just refinanced recently and that seems to have caused an even larger shortage than the last time.

If someone could even just point me in the direction of a good resource for trying to understand how escrow works, maybe that will help me figure out if the mortgage company is mishandling my money some how....

Thanks in advance!

If someone could even just point me in the direction of a good resource for trying to understand how escrow works, maybe that will help me figure out if the mortgage company is mishandling my money some how....

Thanks in advance!

Nicholas L. · Answer

@Nellie Bentz if you've had your mortgage long enough (usually 1-2 years depending on the company), you can request to take your taxes and insurance out of escrow and pay them yourself.  I do this on my primary, pay with a credit card, and get reward points for doing so.

Mike Cumbie · Answer

Escrow is generally money held back to pay expected coming bills.

Escrow can change based on many factors. For instance if you bought a house valued at $50K and the taxes were $1200 a year. You have since improved the property (New siding, new windows, added a shed), the house may have been reassessed at $120K. That could make your taxes $2400 a year. That is a $100 a month increase to you. If you had insurance at 1200 a year but had a claim, they may choose your new insurance premium is $2400 a year. That again would be a $100 a month increase in escrow.

If your mortgage and interest is "Fixed" normally they aren't the cause of the change, it is another factor. There is nothing wrong with calling and asking. It should point you in the right direction. Sometimes you can fight a reassessment, you can also look at other insurance plans to drop the rates.

Hope it helps and good luck!

Russell Brazil · Answer

Add your yearly taxes, your yearly insurance, divide by 12, thats how much should be going into it each month.

Carl C. · Answer

This is why we NEVER do a deal with escrow accounts. We are adults who are fully capable of paying out own taxes and insurance bills regardless of what the bank thinks. Lesson learned for next time; you don't have to have an escrow account. Your bank will want you to have one but it is open for negotiation. You lose control of your money with escrow.

Lisa Eckman · Answer

@Nellie Bentz I’m sorry Nellie, I just saw your response. If you still need help with this, please PM me and I’ll be happy to help. Best of luck!  Lisa

Marquez King · Answer

@Nellie Bentz

I totally understand I’ll sho or you a message and better explain.

Nellie Bentz · Answer

Sorry all... I'm still figuring out how to use this forum. I guess I didn't reply correctly to all the comments and ended up repeating myself a bunch. 🤦‍♀️

Thank you for everyone who took the time to reply so far! I really need all the help I can get... Feeling like I'm making a lot of mistakes 😔

Nellie Bentz · Answer

Do you know if this is true with an FHA loan? Or and do I have to refinance out of the FHA loan into a conventional loan? I was under the impression it was the latter...

I just refinanced earlier this year to try to capitalize on the lower interest rates, and pretty sure I blew that process too. I feel like I am making every rookie mistake possible. maybe I should just sit on the sidelines for now and read some more books 😔

Nellie Bentz · Answer

Yes, I should have phrased my post differently... I understand the concept of escrow... I only recently learned about this cushion that they require, and not understanding that was definitely hurting my ability to understand the basic calculations behind my escrow increases... But even now that I know that, it still seems like the small increases in insurance and taxes doesn't justify what seemed like large shortages to me. Again, This is my first and only mortgage, so I have nothing to compare it to.

I'm not sure who I can talk to and have them review my specific escrow funds to see if they're seeing a discrepancy...Would it be a lawyer? A CPA? I did try calling the escrow department at my mortgage lender and But the customer service department told me to send an email Because they really didn't answer phone calls. And then my email got an auto-generated reply resolving the request But not giving any answers. I haven't had time to call back yet.

or am I just being paranoid and wasting my time and energy... Should I just assume they are handling the escrow funds correctly?

Nellie Bentz · Answer

there have been small increases in the property taxes and the homeowners insurance. However I don't understand how the small increases have caused such massive shortages. I refinanced earlier this year, and in the process of the refinance they paid out my homeowners insurance early. So then when my actual homeowners insurance was charged and paid my insurance company refunded me over $900. figuring it was missing from my escrow account and would cause a shortage, I deposited the check back into my escrow account and requested a reanalysis. And even with that large cash infusion, I still was apparently short and they increased my monthly payment by $17.

that just seems like mismanagement to me, But maybe I'm just being paranoid? This is my first experience as a homeowner and with an escrow account, so I don't have anything to compare it to. But knowing  that most people are incompetent and don't do their jobs right, it makes me very nervous when other people are controlling my money and it doesn't seem like they're doing a good job

Escrow: why don't I understand it?

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