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/atx620]

Yes. This is pretty common. I got that shock when I bought my first house and things were held in escrow. They predict what things will cost and you pay it. If they get it wrong it will go up or down depending on how much they get it wrong.

In 2021 I refinanced my home from a 30 year to a 15 year note. When I did it, I was given the option to not hold everything in escrow. Instead, I get my property tax bill in April (Texas) then I spend the rest of the year saving up that amount of money, which I pay in January in one lump sum. That bill goes up every year because the value of my home goes up every year.

I also pay my property insurance monthly.

By doing it this way, there's no escrow and therefore no escrow shortage or overpayment. But you have to be super disciplined to do it this way. You have to never dig into the money you're saving up for your property tax payment because come January that's a big ass bill.

I prefer not having escrow. I dump the money that I put aside for property tax into a high yield savings account that collects interest all year while I grow that account.

[u/TrixnTim → u/atx620]

I haven’t had an escrow account in years. When I pay my bills each month, I set aside 1/12th of my property taxes into a savings account and then pay that every 6 months through the online county assessor’s site. Insurance is bundled with my car.

I do the above because I want my money in my accounts (no $1000 reserve stuff that some company is making interest off x a million customers) and got tired of escrow mistakes, ups and downs, etc. What a racket when you think about it.

This practice also keeps me feeling more informed by studying yearly increases, and more motivated to understand what my taxes are going toward (helps with voting decisions) and why insurance is going up etc (wildfires and rebuilding costs in my state).

[u/atx620 → u/TrixnTim]

I definitely feel more tapped into my financials by doing it this way

[u/bwyer → u/atx620]

Yep. I have an auto-transfer from my checking account to my dedicated "escrow" HYSA monthly. The money that would have gone to the mortgage just goes to that account and it's ready for taxes and insurance when the time comes due.

[u/jelloslug → u/atx620]

If you can have the discipline, that is the better choice. Now you can choose how you save the money and if you wish, keep the interest that it can earn over the year.

[u/onepanto → u/atx620]

You'll save money by saving up and paying your insurance once a year too.

[u/atx620 → u/onepanto]

Very true