Real Estate

How will an increase in property taxes or insurance premiums effect my mortgage payment

The majority of buyers have an escrow account. This account collects money monthly so that when the property taxes and insurance is due the lender will pay the bill. I think this is smart. Especially since property taxes are due in December just in time for Christmas.
Taxes and insurance may increase or decrease over time. As these costs change so will the necessary amount needed in your escrow account. When taxes or insurance premiums increase they cause a shortage in your escrow account. The lender will perform a yearly escrow analysis to determine if you have enough money in your escrow account to pay your taxes and insurance. To do this they take your yearly tax amount plus your yearly insurance premium divide it by 12 and then add a certain amount as a cushion. Each year you will get a statement from the county regarding your property taxes. Do not simply look at it and throw it away. Go back and look at what you paid last year in property taxes. If the amount has gone up significantly, call the lender. You will need to either pay the difference (shortage) into your escrow account or have the lender recalculate an increase in your escrow account immediately. This will cause your payment to go up but may be significantly less than if you wait for the next escrow analysis. If you simply throw the notice away and do nothing you are going to have a large increase in your mortgage payment next year. How much more you ask? Well if your taxes went up $240 a year, this would cause a shortage of $20 a month. The lender will need to collect the shortage plus an additional amount for the anticipation of the paying this new amount again next year. If your escrow analysis is later in the year, you could have a larger shortage meaning your payment could increase $40-$60 a month. Now think if both your taxes and insurance increased, your payment could really increase. Of course with insurance you can always call around and look for cheaper insurance, not so with taxes.
My advise would be to compare your taxes and insurance premiums each year and be proactive. I personally prefer to pay the difference and have my payment remain more consistent.

If you need a realtor to buy or sell I would love to help you. Please feel free to call me at 405-213-2992

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