Hey everybody, hope you’re doing well. As a top Salt Lake City mortgage broker, I often get questions about interest rates, refinancing, buying homes, and similar topics. As part of that process, I always ask clients for their existing first mortgage statement assuming they have one. Lately, I’ve noticed a concerning trend with escrow accounts, which are used to pay property taxes and homeowners insurance. I want to bring this to your attention and encourage you to review your most recent mortgage statement and double-check your escrow balance.
For example, one recent client’s statement showed a negative balance of $531.66 for a payment due October 1st. In Utah, property taxes are due in November, so your escrow account should have several thousand dollars saved up by now. If the account is already negative, paying those taxes will push it even further into the red, leading to a major shortage. When your lender performs the annual escrow review early next year, your monthly payment could increase by hundreds of dollars to make up for that shortage.
In another example, a client was $2,000 in the hole when the account should have had a positive balance of around $4,000, a $6,000 difference. The main cause of this issue is rising homeowners insurance premiums and changes in policies. Many homeowners are shopping around and switching insurance providers, which is fine. However, when the old policy is canceled, the refund from the old insurance company often doesn’t make it back into the escrow account. If that refund isn’t deposited, the escrow balance ends up short, leading to problems later.
If you’ve recently switched homeowners insurance, make sure you receive your refund and deposit it into your escrow account to maintain a positive balance. Otherwise, you risk a large payment increase when taxes are paid, and the annual escrow analysis is conducted. Federal law requires lenders to review escrow accounts annually, and if the balance is too low, you’ll need to make up the shortage either all at once or spread out over future payments. Paying it all at once keeps your monthly payment increase minimal, while paying over time could cause your payments to rise significantly.
If you have any questions or want me to review your mortgage statement, feel free to reach out. You can email your existing first mortgage statement to me at [email protected]. Thanks for watching, take care, and we’ll talk soon.
