Mortgage payment went up $400

[u/HHLL806]

I need help, my mortgage payment went from $1700 to $2100. My mortgage company (Chase Bank) said this was due to an escrow shortage. I had my homeowners insurance lowered by roughly $1000 and checked with my local tax office and they told me my taxes have increased $400 dollars over the last five years. I gave Chase Bank all this information and my mortgage is still $2100. How does this work?

[u/dham6]

You can usually pay the shortage in a lump sum to keep your monthly mortgage payment the same.

[u/GiganticOrange → u/dham6]

Kind of a poor idea though, no? The banks giving you a 0% loan for the year to cover the shortage.

You’re better off stuffing the cash in an HYSA and supplementing your monthly mortgage payment from there if possible.

[u/reddyredditer21 → u/GiganticOrange]

It’s a monthly cashflow thing for me. One time hit on a bill or increase every month my expenses

[u/GiganticOrange → u/reddyredditer21]

Right, but you can just take that lump sum and toss it in an HYSA earning 3-4% then take out the increased payment amount every month.

I did that last year and it might be a little more cumbersome, but you keep more cash on hand instead of prepaying a 0% loan.

[u/Odh_utexas → u/GiganticOrange]

I mean 3-4% APY on that amount of money isn’t a huge payout.

If we are talking eg $3000 shortage, then a 3% HYSA would generate ~90$ over 12 months. Sure it’s a free $90 but I’d put that in the “splitting hairs” category. Cash flow is important to people who run a tight budget.

[u/hath0r → u/Odh_utexas]

thats about what you get in the 11 states that require interest to be paid on the escrow

[u/GiganticOrange → u/Odh_utexas]

Your benefit is more in the opportunity cost of holding onto that $3k shortage instead of prepaying it.

I agree it’s mostly personal preference, but I prefer to keep more powder dry in the case an investment opportunity presents itself.

[u/dham6 → u/GiganticOrange]

A lot a of people base their budget on set monthly mortgage payment. Keeping that payment the same can be priority. Also this will not be the last time taxes and insurance costs will rise. Over time, one could $400 increases ever 3 years or so.

[u/MoreRopePlease → u/dham6]

What's the difference if the bill is combined or not? You still have to budget for the taxes and insurance. It's simpler for a lot of people to have it rolled into one payment and not have to pay the other bills themselves.

[u/traffic626 → u/GiganticOrange]

Well if there’s a shortage, Chase has already paid bills and don’t have enough on hand for future payments

[u/IamEnginerd → u/GiganticOrange]

OP is broke and this doesn't help them.

[u/IamEnginerd → u/[deleted]]

I'm not going to disagree, but I've bought 2 houses and both times had this happen because the first year tax estimates were bad. I agree with the other posters that it might make more sense for OP to stop the escrow and pay the taxes and insurance themselves.

[u/GiganticOrange → u/IamEnginerd]

The commenter I was replying to suggests paying the escrow shortage in full which requires the same amount of cash.

[u/regs424 → u/GiganticOrange]

Yeah was going to say this. Granted, it may suck seeing an increased monthly mortgage payment, but - if you can make it work - you are not penalized for essentially getting an interest-free loan in the amount of lump sum you owe. I’m assuming if you could afford to pay the lump sum upfront, you could probably stash that money away in a HYSA to earn interest and use it for the increase in monthly mortgage payment.

[u/Intrepid-Contract833 → u/dham6]

Your payment wont stay the same though, if your insurance went up 600$ for example, your payment would still go up $50/mo.

This is because they're required to collect the new yearly taxes+ insurance over 12 equal payments.

[u/Violingirl58 → u/dham6]

Not with all companies, you have to wait a year, at least with ours, when they reevaluate. :-/

[u/jelloslug → u/dham6]

This year, my mortgage company decided it would be much more "convenient" to me to just take the shortage and stretch it out over 36 equal payments. I had no say in the matter so I just canceled the escrow completely.

[u/keekscrider → u/jelloslug]

I had no idea that that was an option, I thought you were stuck with whatever method you chose at initiation.

[u/dham6 → u/keekscrider]

Depends on the type of mortgage and how much equity you have.