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Amun Chiong
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A shortage in my escrow account. What should I do?

Amun Chiong
Posted Nov 19 2023, 10:57

Good afternoon, I recently turned my primary residence into a rental property. During the process, I was notified by my bank that I had a shortage of the amount that was due or it would be spread out for the next 12th months. My escrow account wasn't able to cover the amount because of an increase in property tax. I was able to pay some of the shortage down and was going to pay the rest off. However, I got my statement saying how much my mortgage would be for the next 12 months including the shortage amount. It came out to the exact amount my tenants are paying for rent. I started thinking maybe I could just let them pay off the shortage amount and forget about paying the shortage off right now. Is this a good idea? Either way, I was going to pay it but instead, my tenants are paying the shortage spread for the next 12 months.

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Bill Brandt#3 1031 Exchanges Contributor
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Bill Brandt#3 1031 Exchanges Contributor
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Replied Nov 19 2023, 11:55

I don’t believe there is ever any interest charge and making the 1/12th payments so there is no reason not to do it that way. Remember your payment 12 months will be even higher as taxes and insurance increase. Why keep writing a 13th check. 

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Wayne Brooks#1 Foreclosures Contributor
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Wayne Brooks#1 Foreclosures Contributor
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Replied Nov 19 2023, 17:03

@Amun Chiong Your tenants pay you Rent…..period. If you’re not in a fixed lease, raise the rent, same Net effect without the ludicrous idea of having tenants send checks to your mtg company.

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John Morgan
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John Morgan
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Replied Nov 20 2023, 07:10

@Amun Chiong

This happened to me on a couple properties recently. I’m just paying the new higher escrow for a year. Then it’ll adjust down starting next year so not a big deal.

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Amun Chiong
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Amun Chiong
Replied Dec 31 2023, 14:51
Quote from @Bill Brandt:

I don’t believe there is ever any interest charge and making the 1/12th payments so there is no reason not to do it that way. Remember your payment 12 months will be even higher as taxes and insurance increass. Why keep writing a 13th check? 

The tenants aren't paying the mortgage company!!!!!!!!  The shortage spread over the next 12 months is exactly what they are paying me. So in theory I can pay off the escrow shortage myself or just let the rent that I am collecting pay my shortage off through the next 12 months. 

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Amun Chiong
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Amun Chiong
Replied Dec 31 2023, 14:52
Quote from @Wayne Brooks:

@Amun Chiong Your tenants pay you Rent…..period. If you’re not in a fixed lease, raise the rent, same Net effect without the ludicrous idea of having tenants send checks to your mtg company.

The tenants aren't paying the mortgage company!!!!!!!! The shortage spread over the next 12 months is exactly what they are paying me. So in theory I can pay off the escrow shortage myself or just let the rent that I am collecting pay my shortage off through the next 12 months.

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Jonathan R McLaughlin
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Jonathan R McLaughlin
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Replied Dec 31 2023, 15:37

This is common and is essentially the bank saying “we are going to collect the new tax amount” and giving you the option to lend them the money by paying it early :) 

Just spread it out over the 12 months as your new baseline. Won’t be the last time.

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Dan Heuschele
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Dan Heuschele
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Replied Dec 31 2023, 22:52
Quote from @Amun Chiong:

Good afternoon, I recently turned my primary residence into a rental property. During the process, I was notified by my bank that I had a shortage of the amount that was due or it would be spread out for the next 12th months. My escrow account wasn't able to cover the amount because of an increase in property tax. I was able to pay some of the shortage down and was going to pay the rest off. However, I got my statement saying how much my mortgage would be for the next 12 months including the shortage amount. It came out to the exact amount my tenants are paying for rent. I started thinking maybe I could just let them pay off the shortage amount and forget about paying the shortage off right now. Is this a good idea? Either way, I was going to pay it but instead, my tenants are paying the shortage spread for the next 12 months.


If PITI matches rent, this property has very large negative cash flow when encountering for all expenses and vacancies. If this s the case on an existing owned property (personal home converted to rental), I question if this property makes a good rental my way of saying I suspect it is a poor rental property).


I think if you pre-pay your escrow shortage or pay it over the next 12 months is not going to be your primary concern.  If there s no interest charge, I would choose to pay it over the 12 months.  

Good luck. 

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Replied Jan 1 2024, 06:00
Quote from @Amun Chiong:
Quote from @Wayne Brooks:

@Amun Chiong Your tenants pay you Rent…..period. If you’re not in a fixed lease, raise the rent, same Net effect without the ludicrous idea of having tenants send checks to your mtg company.

The tenants aren't paying the mortgage company!!!!!!!! The shortage spread over the next 12 months is exactly what they are paying me. So in theory I can pay off the escrow shortage myself or just let the rent that I am collecting pay my shortage off through the next 12 months.

 LOL this is more like statement of fact than question :-) What you experienced is 100% what land lord would experience :-) whatever your decision is, that doesn't really matter. Bank wanna get paid, you wanna get paid , the city wanna get paid, the renter want a safe house ;-) lol