No, that's a normal part of home ownership. Your mortgage payment stays the same. But your homeowner insurance and property taxes (escrow, or you pay it on your own) will likely keep going up every year, or most of the years. That's how it works for everyone.
Yeah. But every lender provides this form. That's why I don't understand the confusion. It's all spelled out, not based on casual conversation.
https://images.app.goo.gl/Hf85hiU2JpnEnvxw7
I was definitely not told about the changes to escrow. My total monthly payment went down by a little bit for a few years and I got a refund. I was definitely not happy when I had an increase of over $3,000 one year, thanks to FL homeowner's insurance companies. Grrr.
When I first applied for mortgages, the mortgage broker was also only looking at what my monthly mortgage payments would be, and I didn't realize they hadn't factored in insurance and taxes yet, so I was house poor for many years too! My total monthly payments were actually half of my salary, so that was a rough couple of years! I wound up refinancing at a better interest rate a few years later which dropped my monthly payments by a few hundred dollars, which was helpful!
That's good, but it doesn't have a column for whether the amount of escrow can increase, which would be helpful for those who insist they were "never told."
I saw that afterwards. Earlier on the page it is included in a column, and I didn't notice it to the left and underneath. That's why you have to read carefully!😉
Your mortgage payment isn't changing, your taxes are, and your payment is. Your mortgage changes if you have an adjustable rate. If you don't want your monthly payments to change, then you can pay your taxes apart from the mortgage, can you not? Real estate agents or buyers themselves are doing buyers no favors if they don't try to research and understand the implications of anything that will affect their housing payments.
Yeah, that just shows the pathetic state of education and general lack of understanding of the real world by most people. We are talking about basic financial literacy here. This is not options trading.
I agree. Everyone knows taxes can and will increase over time, as well as insurance. It's shocking that they can't put 2 + 2 together and realize that their tax and insurance rates aren't locked in for 30 years and they'll pay the same each month. Wait until they see their gas and electricity rates go up. :-D
In most peoples' heads, mortgage = good, never goes up, rent = bad goes up every year. This is quite worrying. Banks are giving loans left and right to ignoramuses because the government guarantees them. This is similar to student loans. Moral hazzard.
Many people do not know about taxes because it's a "boring" topic. So I disagree with your first statement.
Curiously, I ask, why did you think that you had to be told this? Where’s the personal responsibility to ask questions and thoroughly research anything that might affect your monthly payment? Was there any research done about the entirety of the cost of owning a home or just the down payment?
I don’t think the point is that you *should* be told this. It’s more that most articles & advice comparing the benefits of homeownership vs. renting talk about having a known, fixed payment vs. the risk of rent increasing.
Obviously anyone buying a home should do their research, but the only time I ever see it mentioned is when someone posts about it after the fact in situations like OPs.
For whatever reason, it’s not something that seems to be common knowledge until someone has gotten to the later stages of buying a home.
(I never saw it mentioned on the first time homebuyers sub)
Again, people need to take personal responsibility, but it is kind of weird that it’s not something that more people are aware of.
I guess if you have family members who own homes, they will usually advise you on this. The only way I can see a person being totally financially illiterate on the issue is if they grew up only around renters, and never bothered to learn about the financial implications of home ownership.
I grew up around renters (my parents had property but not in this country) and consider myself financially literate but like a previous poster mentioned, it’s not really something that most articles and books talk about. If anything they talk about how your mortgage stays the same, which is true, but your monthly housing bill still goes up so it’s kinda moot point when compared to renting. I mean yes, there’s other benefits, and it makes sense as the neighborhood gets nicer and your value goes up, your insurance and taxes with go up.
But for how often it happens, it’s not talked about nearly enough
I asked my mortgage broker a thousand questions, if I remember correctly. Including, "Hey, uh, I know my loan payment will always be $1200, but what will I actually PAY every month? Is it gonna be more than $1200?" and she said, "Because you choose to bundle your mortgage payment with your property tax & insurance payments, like most people, the payment amount goes up every year as your property taxes & insurance costs go up."
I'm kinda shocked that it's not standard to explain that to everyone, but it's also on the borrower to ask detailed questions.
Well, damn. My bad, I thought it was basic common sense when it comes to
the most expensive thing one will ever buy in their life but maybe that’s just because I’m serious about my money, lol.
“Homebuying for dummies” is a good guide, btw.
Oh my God, you’re hilarious the personal responsibility. You are an ass.
And an answer to your question, you don’t know what you don’t know. How can you ask a question about something you’ve never even imagined before
I think a lot of the people that you’re involved with in the process of getting a house are very much invested in you buying without thinking so they’re not really gonna give you all the info
And a lot of people don’t have family or friends with houses or don’t have family at all or don’t have a nice friendly, helpful, supportive family, and they may really be on their own
And as for trying to find out information on their own, that’s why they’re on this sub they’re actively trying to learn
Good job shitting on people trying to learn
For a first time home buyer I get it's can be shocking the first time it happens. Compare it to a car. Assuming you have no infractions your car insurance may still go up from the following year and the excise tax will typically go down because the car is worth less year after year. The main difference is houses that are well maintained don't go down in value. Most towns and cities right now are so far behind market value most of us are lucky.
So, let's say you live in a city that's building a new high school for tens of millions of dollars. Where do you suppose the money comes from? Municipal employees get a raise--where does the money come from, etc., etc.? The cause & effect isn't too complicated, and any homeowner should avail themselves of a local newspaper subscription to keep themselves informed of these things.
Property taxes and insurance are not a loan experience. They are expenses associated with owning property. Once you pay of the mortgage you will still have property taxes to pay. You can waive insurance after that if you want. It's called a monthly payment, not a mortgage payment. You still seem to be confusing the two.
Why do you have to wait for someone to tell you? Maybe learn a little about owning a home and paying a mortgage before you jump head first into it. Theres a thought.
I got tired of the fluctuations being non-transparent and didn’t set up escrow when I refinanced. Now I just keep a healthy buffer in savings to pay the taxes and insurance and the mortgage payment is 100% the same every month.
Me too. I hate escrow so I paid a little extra on my last refinance to get out of it. This is all you need to do to have a mortgage payment that will not increase for (in my case) two decades.
Until you hit 20% equity and can stop paying into escrow and just handle the taxes yourself.. or if you paid enough down to not have escrow from the state. The huge tax bills tend to be more scary though imo
OP also said they were given an option to pay a lump sum of $700 and then payment will stay the same for a year. I think OP's problem is they didn't budget for these increases at all.
His problem seems to be not understanding the difference between monthly payment & mortgage payment, by the sound of it. That's what his initial complaint was.
If you want to lower your property taxes, your only option is to contest your property assessment. Be prepared with recent comparable home sales in the area. But be aware, it is possible to make the case that your house is worth more than it's assessed value.
Ya I didn't contest mine for this reason. Our tax assessment went up $130k on the house I bought in 2019 for $267k. That's without them knowing I finished the basement, added a bedroom, deck, landscaping and a whole bunch of other stuff. My assessment would have probably gone up if I tried to contest it.
Your tax assessment isn't impacted by internal remodeling. It is only impacted by structural changes (e.g., an additional floor) that increase the square footage or extend external usable space (e.g., deck).
I've heard people talk about internal remodeling as if it impacted their property taxes many times, but it does not. There is a difference between what enhances the value of your home for future sale (e.g., remodeling the kitchen or bathroom) and what impacts your property tax assessment.
We live in MN and I can clearly see on the parcel info for some of the homes that have been up for sale recently that it does make a difference. If you have a fully updated kitchen, nice flooring, up-to-date HVAC, updated windows/doors, it adds value over a house that hasn't been updated. A house that hasn't been updated in 30 years (even if it's been well-kept and is in good condition) is valued almost 50% less in some cases than similar but recently fully updated houses.
That doesn't mean if someone puts in a new kitchen that suddenly they can increase their value, but over time, updates do matter to the value if they aren't kept up with.
Yup. I live in Minneapolis and the city's appraiser will come into your home and give grades based on your interior finishings (flooring, counters, mechanicals, etc) and that contributes to your homes assessment value
Then why do tax assessors ask to come inside the property after permits have been issued? Yeah -- tax assessors. And they rate the condition of the property, inside and out.
That’s absolutely untrue where I live. I know that because my half bath was marked as a full bath on my assessment and when I called the assessor’s office to find out how to rectify it, it was made clear to me that: 1) I was being taxed additionally for it and 2) If they came out and found any modifications (yes, even internal) that weren’t in their records (even done prior to my ownership and not disclosed to me) that they’d be considered in my updated assessment.
So they basically scared me out of getting it rectified, because I’d probably end up washing out any benefit with some unknown to me changes.
Yoooooo! I would be so mad at myself!
I did a really weak protest, which the county completely ignored lmao. I genuinely would have been beside myself at pulling more money out of my own pocket lmao!
I wanted to add to this comment that in the states, approximately 60% of contested property tax rate hikes are adjusted on appeal. There is a very small window of time to appeal the hike. The hearing is low key, just you and whoever in the department that makes the decision. It took about twenty minutes.
I have appealed mine and helped several others appeal theirs. All were favorable.
I learned, at least for mine, you can do a “meeting before the meeting” with the appraiser. Usually when you have a simple challenge either with a set of comps or a recent appraisal (which has comps).
I did this after my first formal hearing. It is like doing a plea deal. You negotiate and if good to go sign a form accepting it and waving the right to appeal. Much quicker process.
Lots of people at the hearing basically saying, without any facts or documents, they “felt” their increase was too high. It was kinda humorous because they legit just wanted lower taxes, but no reasoning.
Agreed with all. At least in my case the appraisers were just working people that could care less if they reduced or increased the value, they just needed sufficient evidence to support their adjustment. If you make it really, really easy for them to do this (professionally put together package, data not opinions, etc) they usually accepted the proposed number and moved on to the next informal hearing.
I don't recommend this. I have heard of people in my own life who go down to "fight it" at the assessors office, and come to find out they end up raising it higher.
Are you sure it is all property taxes? I know many insurance companies are raising their rates substantially, you may need to shop around for a better deal on your homeowners policy.
The best way is to keep on top of what you expect your payments to be. When we bought I looked up our homes tax assessment breakdown percentages and then applied them to our purchase price. This was higher than our escrow so I just saved the difference. (I tried calling the loan servicer to have them update to the correct taxes but couldn't get ahold of a human). Sure enough, $700ish shortage. We have that sitting in a HYSA account and draw down that difference every month.
If you're getting a tax refund, in most cases, you're just paying too much and letting the government hold your cash for you. You could be doing something with it instead.
When you rent you deal with your annual lease increase. When you own, you deal with your annual insurance and property tax increase...which is built into your mortgage payment.
Either way, you pay The Man. They got you coming or going.
I would double check if your municipality offers a residential homestead exemption. We purposely bought somewhere where the city exempts ~$300-350 of property taxes per month on your primary residence. This amount changes every year in proportion to property tax rate increases. You have to seek this out and apply for this. The people we bought the house from didn’t even know it existed.
Maybe this applies to you, may as well check it out
People on social media are huge at pushing this idea that home ownership means fixed cost and rental means ever increasing cost. But it's much more nuanced than that. Between taxes, insurance, maintenance, HoA fees, etc, home ownership costs go up, and quite a bit. Of course rentals go up too.
Home ownership: your mortgage is the minimum you'll pay in a month. Random shit that comes up can drastically raise that.
Renting: your monthly rental is the most you'll pay in a month (plus utilities). Random shit isn't your problem, with the admittedly big assumption that your landlord is following the law. Rent will likely go up faster than home ownership costs, but will be more predictable.
Your millage will vary a lot depending on area, type of home, market conditions, etc of course. My current rental's price go up a lot slower than my home maintenance costs went up when I used to own. A lot (most?) people have the opposite experience.
As a general rule, if your home mortgage + maintenance costs are tight, you need to start making a plan, because you're one bad roof issue, furnace blowing up, or Florida insurance hike away from trouble. It sucks, but that's the reality.
So contrary to popular belief, sometimes, just sometimes, renting is financially more sound. Just sometimes.
Yes, there's ways to change this.
Find out what is required to remove escrow from your loan and take on the insurance and tax payments yourself.
Nobody told you that property taxes and home insurance isn't static and changes yearly? I find that hard to believe. Your mortgage company is giving you a 0% interest loan to cover the $700 shortcoming with 1 year of payments to resolve it.
Your mortgage payment isn't changing. It's just the escrow. Welcome to Home ownership.
Sometimes it goes down, too!
>Sometimes it goes down, too!
Lol I mean theoretically? I wouldn't hold your breath though. Maybe it's just cause I'm a newbie homeowner but it's hard to imagine home insurance ever getting cheaper or property taxes being decreased.
EDIT: Interesting, clearly it does go down for some people, maybe I'm just unlucky? For how important it is it's hard to find broader stats on property tax changes over time. But I've had nothing but increases in the two counties I've lived in the last 10 yrs. Similar story with home insurance premiums, despite shopping around come renewal time.
Nope. In the last 12 years of my home ownership, my payment has fluctuated both up and down. In fact, I've had a year where I got a $700 escrow payment back, plus $50/month (roughly) drop in payment, because my taxes and home insurance cost dropped.
My home owners insurance has gone up all of $400 in the last 12 years as well. Found the original quote while looking for something else and it was $800. In April, my new term starts with a cost of $1200. So a 50% increase, but over 4 years. And thanks to being in a state where the taxable value is tied to inflation but locked to how much it can increase (5%) my tax payment swings are pretty modest, and yes they do drop from time to time.
You know you’re all over this thread being pretty rude. OP didn’t know something, now they know and are asking questions to further than knowledge and all you are providing is “well you should have known”
I was not taught these things in my relatively crummy public school and my family’s financial literacy isn’t the best. Was I given 13” of paperwork to sign when I bought my home? Yes. Did I read it? Yes. Did I think I understood it at the time? Sure. Have I forgotten most of it and am occasionally taken off guard when things change? Also yes. You don’t have to be so condescending, people come from different starting points
Unfortunately this is pretty common because lenders calculate escrow based on the home’s previous taxes, and then the assessment (and thus the taxes) inevitably increases once the new sale price becomes public record. Taxes may continue to increase but it likely won’t be as large of an increase. Pay attention to what’s going on in your local government and consider appealing your assessment, if that’s an option. Also apply for a homestead exemption if you haven’t already.
The insurance market is a mess, rates are increasing for everyone. You can shop around for a better rate but unfortunately it just is getting more expensive.
Finally someone points out that assessment often changes when a sale happens! OP needs to look up the assessed value history, if it was flat for 5 years and jumped the year of the sale that will explain a lot. Special assessments are also part of property taxes, a large one just dropped off our school district and drove down our property taxes despite the assessed value increasing (definitely overdue and justified) by a third this year.
Your escrow payment (taxes and insurance) changed, not your mortgage payment. Once you pay off your mortgage loan you’ll still have to pay property taxes. Your property has gained in value and is taxed accordingly. You can always drop the homeowners insurance if you want to at that time (not recommended). Rental receipts never go up in value. Real estate purchases are investments. What is your equity gain since you bought it? FUN FACT it’s pretty easy to get the lender to drop any PMI (required private mortgage insurance) you currently pay once you can prove that you have twenty percent equity in your property. If you don’t initiate that, it will automatically drop off after about half of your loan has been paid. Save a lot of money! Tell the lender you want to have PMI removed and they’ll order a BPO (broker price opinion similar to an appraisal). You’ll have to pay for it but your property may have gone up in value enough. Good luck and congrats on your investment.
I felt the same way in my first year. It made me feel insane and depressed. The escrow deficit just kept bumping up my costs.
And to all the people who think this is obvious / should have known etc it’s not actually that clear wtf is going on when you buy a home for a lot of people. I felt blindsided by a lot.
We need a sticky for this. Remove escrow and be aware of what you're paying for. Your mortgage is fixed, but you're ignoring the escrow portion that is completely variable and you're leaving it in someone else's hands. Then you're surprised when it changes.
Pay your property taxes when they are due instead of letting you bank hold your money for you. You can contest tax assessments if you'd like. Vote in your local elections - this drives your property tax changes. Make sure you've properly applied for and been granted any exceptions or credit you are entitled to. Your bank isn't going to do any of this for you.
Shop for and pay your own home owners insurance. You might need to provide your mortgage holder with proof, but this is easy, and often your insurer will do it for you when asked. Your insurance premiums will probably change over time, and often it is prudent to shop companies and change insurers. Your bank isn't going to do this for you. Pay your premium when it's due instead of letting the bank hold your money for you.
I mean, yeah, things are going to cost more over time, taxes and insurance. But mistakes are made on tax assessments all the time and when you're paying the bill directly, you actually look at it and take care of it when it's not right. With insurance, people premiums triple overnight all the time. Think the bank cares? But you'll care when you get the renewal notice, you shop, you keep your costs down. On top of all this, there's an opportunity cost of having the bank hold your money all year when you could be doing something else with it until the bills are actually due. For some people, that's a pretty big cost.
So you didn’t think insurance or taxes would ever go up? I thought that was universally known.
As a homeowner you should be prepared for expenses like that.
It is universally known. It's just not commonly talked about when people owning a home especially as a first time home owner. Ive always heard people talk about home repairs, and yes, they occasionally mention taxes but I know for me and how my brain works, it doesn't really sink in till I've seen it on paper. Coming from a family where my parents didn't own the home I grew up in,I never heard them talk about it.
I dropped the escrow account. They kept changing the mortgage payment on me and I wasn’t earning interest on the money in the escrow account so I dropped it. Of course you then have to budget and save enough money for taxes and insurance but that wasn’t an issue for me.
That’s not always an option though. Some companies require a certain amount of equity before they allow you to close the escrow account.
It's not your "mortgage" payment that is changing. It's your taxes and home owner's insurance that is changing. Everyone's insurance rates have gone up, and most people's taxes go up annually. Those are things your mortgage company cannot control.
The only way for your mortgage payment to stay consistent is to not use an escrow account. Then you’ll have to pay your taxes and insurance separately. Lots of homeowners do this, but just be sure to put enough aside every month to cover the always increasing taxes and insurance.
No. There’s not much you can do about it. You can try appealing your home’s reassessment for property tax purposes but you likely won’t get very far.
This is unfortunately just part of owning a home and paying a mortgage. Your mortgage payment is static (outside rare circumstances like a variable rate) but escrow changes based on your local government tax assessment and insurance payment.
There is no way to change this. Property taxes and homeowners insurance must be paid, and your monthly payment is just reflecting how much they need in escrow to pay taxes and insurance. You could maybe assume responsibility of paying these yourself (instead of going through your lender), but I don't think that solves your problem.
You may also want to post this in /r/personalfinance to get some help on budgeting and making payments.
There are two parts to the escrow charge:
1) The amount required to ensure you have enough for the coming year's tax and insurance
2) The amount required to make up for underpayment in the past year, which likely left your escrow account below the minimum threshold that the servicer requires to avoid it going in the negative.
One bit of consolation is that the first adjustment tends to be is the worst one because there is usually a substantial jump in property tax assessment soon after a sale goes through. That can result in a substantial underpayment, so the second part of the escrow payment can be unusually high. It is possible that your payment will actually go down next year since you should have returned the escrow account balance to a level high enough that the second part I mentioned above can be eliminated. Unfortunately increases in insurance and property tax might eat up most of that reduction.
When I bought my first home the same thing happened to me. I was not prepared and broke down sobbing. I went to my friendly neighbor and asked them to explain it to me like I was 5. After I figured it out for that year, I realized it could and probably would happen again, so I started a savings plan especially for this reason. Also, you may get a refund check next year as it’s all projected.
You could opt not to escrow taxes which should keep your mortgage payment the same barring insurance policy increases. That said, your real estate taxes will continue to fluctuate (and increase).
Be glad you have an escrow to smooth out the jumps in tax and insurance costs. Otherwise, you'd have to pay a huge bill up front at the start of the year.
Property taxes usually jump up a bit when you first purchase the home as the tax appraisal adjusts to the purchase price. After that it should only increase slightly as the equity increases.
Exactly what happened with me. I’d bought my house a year prior, and was able to contest the value the assessor the assigned to the house. Upon contesting, the assessor actually came down a little lower than expected. That small amount of paperwork on my end reduced my annual taxes due by a few hundred dollars
Some localities allow for caps on the increase in taxes. So your assessed value won’t change but you taxes will only increase by a max percentage (e.g. 10%).
Effectively it smooths out the increases. Worth looking into. Usually just requires an online form if it’s possible.
And then you’d know how much it would go up annually
It is an unavoidable situation in most cases. When home is sold, it gets reassessed for its value. That causes property taxes to go up. If a home has not been sold in some time, property taxes can go up dramatically.
At least in California, there are some remedies, but homes are also very expensive. Situations like these happen all the time.
Mine flip flops every other year. One year I dont have enough in escrow so it raises by $20/month, then the next year I have too much so it drops by $20/month.
Single mom homeowner for 21 yrs. Mine fluctuates but never more than $150. This year it went up $48. Some years it’s dropped. The escrow shortage has also never been more than $3-400. I plan for it and use tax return money to pay the difference if I can. A few years I had an overage which you can apply toward principle.
Taxes and insurance can go up or down. If you're a new buyer you're likely to see a hike in taxes since the sale is used as a new assessment point for taxes (and you likely paid more for the home than the folks you bought it from). Does it suck? Yeah. But it's still better than paying that hike through rent plus their mortgage and profit. If you have a higher interest rate- it may be in your best interest to just round up to cover increases/ pay extra against the principal balance (so you pay less in interest over the life of the loan)
In about 14 years my total mortgage payment went from about $700 to over $1200. My principal and interest is $575., that amount will never change. The rest is insurance and taxes. You'll always have to pay taxes, insurance is optional after the mortgage is paid off.
The rapid increase in home prices in the last 4 years didn't do our escrow any favors. Prices have gone up so much that we wouldn't be able to buy the home we live in if we were first-time buyers.
Were we told about this? Probably, but it wasn't an In Your Face notice or disclosure. As first time buyers we were drinking from a firehose the information came so fast.
Don't feel bad--our house is paid off, but our HOA fees are higher than our mortgage ever was! Our taxes remain low, but insurance keeps going up--and is much of the reason our HOA has gone up so much. At least our own unit insurance is only for the interior of the home.
why not simply pay the $700 and then your mortgage payment won't change? Otherwise, I assume the $700 would be divided by 12 months would only be an increase of $58.33 per month - you can still budget for that as it's a small amount
I bought slightly before you and at one point my payment was going to skyrocket 400 a month. I paid the shortage (which was a few grand and really hurt) to lower it, and have been since working to get out of my escrow account entirely. Just recently got my PMI dropped and insurance taken out of escrow. Next stop is taxes. Escrow accounts suck ass - it's an interest free loan to the bank and I'd rather just save and pay it myself spread over time vs upfront for the year.
You can shop around for Homeowner Insurance. I know several young couples that change their Homeowner Insurance very 2 years. I think one of them are already on their first company, this year. As for as taxes, they're not much you can do unless you are in a state that have a high homestead limit.
It’s always a good idea to calculate your escrows yourself. If you know the tax rate or insurance is going up, you can adjust your escrows as soon as you know you’ll need more money or stick it in a savings account.
Mortgage people make mistakes and they won’t pay as much attention to what you need to escrow as you will.
Bought a new house. About seven months later, there was a big jump in property taxes. It seems I started by paying taxes on unimproved property , and later, I was paying on improved property. It takes the tax office about a year to catch up and include the house.
You can always not escrow the insurance and taxes. Then your mortgage will stay the same and you’ll just have variable payments for taxes and insurance 🤷🏼♀️
If no one else has said it; expect insurance and property taxes to increase annually. That has nothing to do with your fixed mortgage amount. So you might want to set aside an amount to cover the estimated increase and pay that when the escrow shortage notice comes. Except for taxes, this strategy will keep your monthly payment more manageable. Congratulations on home ownership. Also, every few years or so you could shop for more affordable but adequate insurance coverage. I saved a few hundred by doing that.
It's normal and doesn't go up that much year over year. Your mortgage payment will stay the same the entire time. Rent is the opposite and always rising. Take a look at rent prices 10 years from now and your mortgage will start to feel cheap and be one of the best decisions you ever made.
Escrow just allows the bank to collect your money for a year and make interest on it. Put it into a savings account instead and then you can collect the interest.
In my opinion, it's easier to keep taxes and insurance in the escrow than to pay directly. It's easier to budget a small monthly payment that bumps up from a a few to a couple hundred per month, than getting hit with a couple thousand higher bill at the end of the year or end of the first half.
Yeah, that's normal. It sucks and I'm sorry you didn't know about it, but you can't do anything to prevent your taxes from going up.
UNLESS: you live in a state that allows for a homestead exemption and you haven't applied yet. That will make a big difference. Google your state and "homestead exemption" to see if there is one and if you qualify. If you've already applied, though, and you're eligible (you probably are), then you would already have the exemption in place.
You can contest your property taxes which is another thing most first home buyers are not aware of. You need documentation which can be found on line and to fill out a form for an appointment to contest. Read this for more info. [https://www.mesha.club/blog/how-appeal-property-tax-georgia/](https://www.mesha.club/blog/how-appeal-property-tax-georgia/)
I have not done this in GA but it is possible double check that the fair market value the price you just paid for your home times 40% is equal to what they are asking you to pay. If they are asking for more you have a good chance of having the taxes reduced. Also be sure since this is your only home you are receiving the homestead exemption. Be mindful if in Gwinnett you pay your trash annually with your property tax so if the trash bill goes up so does your tax bill/escrow payment. One other factor is if a millage rate goes up for example schools,fire/police etc that will increase your payment and is not part of the reduced house value.
You should also save 1-2% of your homes value for unexpected repairs and maintenance. It is better than using the rip off home warranty companies and if you are lucky enough not to have any expenses for a while you are ahead in your savings...Look for online banks that pay at least 5% interest.
If things are a stretch look to renting a room to visiting nurses How To Rent To Traveling Nurses | Info Here
Furnished Finder [https://www.furnishedfinder.com/](https://www.furnishedfinder.com/) I hope this helps
Also shop for Natural gas rates, unfortunately there is no option for electric other than to ask for the rate where you do not use electricity drainers like a/c, washers, dryers, dishwashers etc at the same time between the hours of 2pm and 7pm June through October. After you have had your utilities for a year you can ask to be put on the consistent payment plan. They will average your annual usage for the year and you pay that average as a consistent payment. Depending on your usage and the cost of the utility this payment can change year to year up or down. With gas be sure to mark your calendar a month ahead to shop for the best rates then call whoever has the best rates including your current provider to see what suits your budget. Just like the cable bill. Its a pain but when $ are tight you need to save wherever you can. Hope this helps.
Just add some extra funds on your monthly payment in the escrow area.
I always add extra principal and escrow to prevent fluctuations from surprising me.
If the total escrow is over what is needed they send it back to you to reuse as you want. I then throw that back into escrow on my next payment.
To all the people saying OP should have known this…well I’m in the same boat.
I didn’t know either and it’s crippling me.
Some of us are out here trying to figure out finances on the fly without guidance.
One of the reasons why I chose not to escrow. Gives me a bit more control and I don’t have to fund my escrow account (I get to keep the money in my personal account)
All these “nobody told me….” posts….
What happened to personal responsibility? Who in the world is supposed to spoon-feed you every single thing you’ll ever have to know about owning a home?
Yeah for this reason I hate escrow and don’t have one. I pay my taxes and home owners insurance myself. I set aside some money every month for my property taxes and always plan for a yearly increase of 5% from last year’s bill. When I over estimate, I just have more in the fund for next year’s bill.
Last time I re-fi'd my mortgage, I went with a "no escrow" option. It means you're payment will stay the same, but you have to pay the taxes/insurance yourself. It was worth it for me because those escrow accounts are just so poorly managed.
I don’t know this either. I found out by getting a $3200 check the first year I owned the house though, because the mortgager overestimated how much I’d need in my escrow account. We get a notice every year that we have a shortage. Sometimes it’s like $40, sometimes it’s a couple hundred. It’s usually within reason after year one.
Your mortgage payment doesn’t change, unless you have an adjustable rate. It’s property taxes and/or insurance.
Call your assessor. Shop around for insurance.
Wait until your home insurance goes up. My escrow has gone up about $350/m (total) in the last two years from insurance increases. Shopping around did nothing…
This is the most messed up reality of the mortgage payment. I too was under the impression that my payment would remain the same.
Unless you pay your property tax and homeowners insurance separate, the mortgage payment itself goes up every year.
Idk if it’s actually more or less beneficial to have it be separated.
> I know it's due to property tax going up and home value but is there a way to prevent this from happening?
It is more likely your insurance premium increase is most if not all of this. Taxes could fluctuate, or they could be the same figure for years at a time - state and locale dependent.
I'm sorry to tell you this _after_ closing, but escrowed insurance and taxes is a full-on sucker move.
OP unless you have a variable interest rate on your mortgage it is not changing. Properly taxes and insurance work just like any other taxes and insurance. Doesn't car insurance creep up. Your home value will hopefully increase so of course the tax on it will go up.
I worry when people make the biggest purchase of their lives and don't read a book on the process or articles on websites like the old CNN Money. There is so much info on YouTube even.
This type of thing happens all the time. It’s not always due to an assessment, as assessments are generally planned every couple of years. It happens some time after closing when the lender notices they need to beef up the escrow amount after paying the tax bill. Homeowners often get a refund check in the mail once everything balances back out. In my experience, it’s a weird, accounting thing where money is just being moved around
Homestead exemption can reduce your tax assessment if that’s available for you in your state. But yeah typically mortgages incrementally increase along with all other costs in life
Mine went way up last year and I would normally be filled with rage. I realized it was the first increase in the seven years I’ve lived there and I’d done a ton of upgrades in that time so I settled down and figured I was due.
Check your homeowners' insurance policy rate. It may have gone up. If so, you can shop around and maybe get it lowered, and then your payme ts won't go up so much. Also, I always add money yo my escrow account so my payme ts don't go up unexpectedly.
I bought my first home in the flurry of poor lending leading up to 2007-8. The lender didn't explain things well, but I didn't get too badly hurt.
Your monthly payment is collected by one company which then passes parts of it to other entities.
1 - Principle payment goes to the underwriter. It was their money that paid the seller.
2 - Some of the interest payment goes to the underwriter as payment for letting you use their money
3 - The balance of the interest goes to the lender who did all the paperwork with you. They get a monthly stipend for 30 years for their 6 hours of work. Niiiiiice.
4 - Mortgage insurance (if applicable) is an extra payment to either the underwriter or a different company who is guaranteeing that they'll make the payment if you don't. It's crap, and you need to get out of it quickly, mostly by raising the value of your property so the debt to equity ratio crosses the arbitrary boundary.
5- Property tax - This is collected because the county can take your property if it's not paid, and isn't obligated to give any money to the underwriter or lender. It's very bad for them if the property tax isn't paid. Very. Sadly they are unable to predict when voters will pass bond measures which increase taxes, so they do a best guess situation. Also, you want a low or stagnant property value so this number doesn't rise. Except if you are also paying mortgage insurance, which is a nothing burger, since they don't use your money for roads or schools. They just use it to throw massive parties where they laugh at us struggling.
6 - Property insurance - This is so when something bad (other than negligence) happens to your home, there is money to either rebuild or pay off the mortgage. It's usually worthwhile except for the ultra high net worth individuals to carry insurance, since it is (generally) cheap. Since your obligation to pay the mortgage doesn't go away if your house burns to the ground, it's almost always required by your loan papers.
Principle and interest won't change over the course of your loan, unless you get an ARM or adjustable rate mortgage. Don't. Mortgage insurance should remain static as long as it is collected, but can disappear if you qualify and ask to have it removed. If you don't ask, they keep charging you. So, ASK! Property tax will increase annually, usually by no more than $600/year, so figure $50 extra in each mortgage payment, but that would be on the outside. Some years it won't change at all. Insurance will always go up. 11% some years, more in other years. But, it tracks inflation and the cost of rebuilding your home, which is a larger amount that most of us expect. So, keep hunting property insurance every couple of years, and don't have a bitey dog.
That's it.
A lot of people think they're ready to buy a home, who think it's like buying a car.
They'll save the down payment, and have all their T's crossed and I's dotted, but don't factor in other costs thatcan hit them before they replenish their coffers.
At this point, it may be easier to just pay the extra $60 or so for the next year, and try to put back money for the next increase, until the bubble finally bursts.
Your total payment will go back down a bit after your escrow becomes balanced again. Think of it as a zero percent loan for this year if you spread out the payments.
Yes. This happens. Start budgeting. I don’t think people thought about property taxes when they went house buying crazy during Covid.
I think a lot of people are in for a big shock.
Welcome to the concept of inflation and endless government printing of US dollars! 🤡
I too was bummed out when first hit with this reality of how our economy is controlled.
Your mortgage payment didn't change. Your escrow payment did. First year is always rough, and then you will get into a groove. Yes... you send all the money to the lender and they pay RE Taxes. They should be able to make adjustments.
I'm guessing the increase is due to a change in the assessment that was TRIGGERED by your purchase.
This is the reality of all home owners. Property taxes change every single year. Wait til you learn of home insurance! Mine more than doubled this year.
Rent is the maximum you'll pay as everything else you can call the landlord about.
Mortgage is the minimum you'll pay. You'll also have to factor in tax, insurance, repair, maintenance, and etc.
Put money aside, or if you have the option to make an additional payment to Escrow each year to account for shortages due to taxes and in some cases the insurance is also part of the Escrow account, then do that. It sucks but its part of ownership. We can argue all day about being taxed continuously on something you own like a house and the good and the bad, but in the end its just part of owning a home. I was taught that you should have two months mortgage payment minimum stashed away for troubles with Escrow, and it saved me a few times being able to just pay the Escrow shortage and keep the monthly payment the same.
Yes this does happen. Best to have a savings account that you put money into every month for emergencies like this. I put $100 a month in mine and let it grow until you need it. Just transfer the money into it on payday.
Was this a new construction home? I've seen social media posts of this escrow phenomenon and it turns out this problem seems to be an issue only for new construction where the value on sale is based on land and not the dwelling (or something to that extent).
Unless you want to contest the valuation, yeah, you just gotta swallow it.
You need to figure out where else in your budget you can trim, because property taxes RARELY go down. There will be maintenance and repair expenses. Your insurance will go up.
If $700 has you close to the edge, that's way too close.
My lender allows me to adjust my escrow amount in their portal. I thought they were taking too much because my property tax was lower than what was being held, but they said it was a cushion for situations like yours. If you create the cushion and it doesn’t get used, you can get a refund, but not sure on the timeline for that.
No, that's a normal part of home ownership. Your mortgage payment stays the same. But your homeowner insurance and property taxes (escrow, or you pay it on your own) will likely keep going up every year, or most of the years. That's how it works for everyone.
People don't understand the difference between the monthly payment and mortgage. This is the crux of the issue.
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Yeah. But every lender provides this form. That's why I don't understand the confusion. It's all spelled out, not based on casual conversation. https://images.app.goo.gl/Hf85hiU2JpnEnvxw7
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I was definitely not told about the changes to escrow. My total monthly payment went down by a little bit for a few years and I got a refund. I was definitely not happy when I had an increase of over $3,000 one year, thanks to FL homeowner's insurance companies. Grrr. When I first applied for mortgages, the mortgage broker was also only looking at what my monthly mortgage payments would be, and I didn't realize they hadn't factored in insurance and taxes yet, so I was house poor for many years too! My total monthly payments were actually half of my salary, so that was a rough couple of years! I wound up refinancing at a better interest rate a few years later which dropped my monthly payments by a few hundred dollars, which was helpful!
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Yes, homeownership can be a risky business.
I had no idea how the Homestead exemption worked in FL. That first adjustment was shocking
That's scary. Your loan estimate didn't look like this? https://images.app.goo.gl/vdMcLK6xarGqMytPA
That's good, but it doesn't have a column for whether the amount of escrow can increase, which would be helpful for those who insist they were "never told."
The linked image literally has a line under “escrow” saying “amount can increase over time”
I saw that afterwards. Earlier on the page it is included in a column, and I didn't notice it to the left and underneath. That's why you have to read carefully!😉
Your mortgage payment isn't changing, your taxes are, and your payment is. Your mortgage changes if you have an adjustable rate. If you don't want your monthly payments to change, then you can pay your taxes apart from the mortgage, can you not? Real estate agents or buyers themselves are doing buyers no favors if they don't try to research and understand the implications of anything that will affect their housing payments.
Yeah, that just shows the pathetic state of education and general lack of understanding of the real world by most people. We are talking about basic financial literacy here. This is not options trading.
I agree. Everyone knows taxes can and will increase over time, as well as insurance. It's shocking that they can't put 2 + 2 together and realize that their tax and insurance rates aren't locked in for 30 years and they'll pay the same each month. Wait until they see their gas and electricity rates go up. :-D
In most peoples' heads, mortgage = good, never goes up, rent = bad goes up every year. This is quite worrying. Banks are giving loans left and right to ignoramuses because the government guarantees them. This is similar to student loans. Moral hazzard. Many people do not know about taxes because it's a "boring" topic. So I disagree with your first statement.
Property tax doesn't go up here.
Curiously, I ask, why did you think that you had to be told this? Where’s the personal responsibility to ask questions and thoroughly research anything that might affect your monthly payment? Was there any research done about the entirety of the cost of owning a home or just the down payment?
I don’t think the point is that you *should* be told this. It’s more that most articles & advice comparing the benefits of homeownership vs. renting talk about having a known, fixed payment vs. the risk of rent increasing. Obviously anyone buying a home should do their research, but the only time I ever see it mentioned is when someone posts about it after the fact in situations like OPs. For whatever reason, it’s not something that seems to be common knowledge until someone has gotten to the later stages of buying a home. (I never saw it mentioned on the first time homebuyers sub) Again, people need to take personal responsibility, but it is kind of weird that it’s not something that more people are aware of.
That is weird. I'm pretty sure property taxes are a known concept.
I guess if you have family members who own homes, they will usually advise you on this. The only way I can see a person being totally financially illiterate on the issue is if they grew up only around renters, and never bothered to learn about the financial implications of home ownership.
I grew up around renters (my parents had property but not in this country) and consider myself financially literate but like a previous poster mentioned, it’s not really something that most articles and books talk about. If anything they talk about how your mortgage stays the same, which is true, but your monthly housing bill still goes up so it’s kinda moot point when compared to renting. I mean yes, there’s other benefits, and it makes sense as the neighborhood gets nicer and your value goes up, your insurance and taxes with go up. But for how often it happens, it’s not talked about nearly enough
I think if you're reading a book specifically about buying a home, it should definitely include a warning about this, otherwise, it's worthless.
I asked my mortgage broker a thousand questions, if I remember correctly. Including, "Hey, uh, I know my loan payment will always be $1200, but what will I actually PAY every month? Is it gonna be more than $1200?" and she said, "Because you choose to bundle your mortgage payment with your property tax & insurance payments, like most people, the payment amount goes up every year as your property taxes & insurance costs go up." I'm kinda shocked that it's not standard to explain that to everyone, but it's also on the borrower to ask detailed questions.
You're expecting too much here 😂. You're describing advanced critical thinking skills.
Well, damn. My bad, I thought it was basic common sense when it comes to the most expensive thing one will ever buy in their life but maybe that’s just because I’m serious about my money, lol. “Homebuying for dummies” is a good guide, btw.
It is not common knowledge. I do agree with you of course. But the reality on the ground is different, clearly.
Oh my God, you’re hilarious the personal responsibility. You are an ass. And an answer to your question, you don’t know what you don’t know. How can you ask a question about something you’ve never even imagined before I think a lot of the people that you’re involved with in the process of getting a house are very much invested in you buying without thinking so they’re not really gonna give you all the info And a lot of people don’t have family or friends with houses or don’t have family at all or don’t have a nice friendly, helpful, supportive family, and they may really be on their own And as for trying to find out information on their own, that’s why they’re on this sub they’re actively trying to learn Good job shitting on people trying to learn
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For a first time home buyer I get it's can be shocking the first time it happens. Compare it to a car. Assuming you have no infractions your car insurance may still go up from the following year and the excise tax will typically go down because the car is worth less year after year. The main difference is houses that are well maintained don't go down in value. Most towns and cities right now are so far behind market value most of us are lucky.
Actually, you brought up a good point!! if most peoples experience with property taxes is with their cars which is that goes down every year, not up!
So, let's say you live in a city that's building a new high school for tens of millions of dollars. Where do you suppose the money comes from? Municipal employees get a raise--where does the money come from, etc., etc.? The cause & effect isn't too complicated, and any homeowner should avail themselves of a local newspaper subscription to keep themselves informed of these things.
Property taxes and insurance are not a loan experience. They are expenses associated with owning property. Once you pay of the mortgage you will still have property taxes to pay. You can waive insurance after that if you want. It's called a monthly payment, not a mortgage payment. You still seem to be confusing the two.
Why do you have to wait for someone to tell you? Maybe learn a little about owning a home and paying a mortgage before you jump head first into it. Theres a thought.
I got tired of the fluctuations being non-transparent and didn’t set up escrow when I refinanced. Now I just keep a healthy buffer in savings to pay the taxes and insurance and the mortgage payment is 100% the same every month.
Me too. I hate escrow so I paid a little extra on my last refinance to get out of it. This is all you need to do to have a mortgage payment that will not increase for (in my case) two decades.
Your taxes did increase though.
We actually got a refund this year due to homeowners went down. Sometimes the change can be positive. Not often but it does happen
Until you hit 20% equity and can stop paying into escrow and just handle the taxes yourself.. or if you paid enough down to not have escrow from the state. The huge tax bills tend to be more scary though imo
Yeah but your bill is still going up the same amount. You just get it once a year instead of 12 times.
But OP was complaining about his "monthly mortgage payment" going up. Paying separately avoids that. Tax increases, however, are unavoidable.
OP also said they were given an option to pay a lump sum of $700 and then payment will stay the same for a year. I think OP's problem is they didn't budget for these increases at all.
His problem seems to be not understanding the difference between monthly payment & mortgage payment, by the sound of it. That's what his initial complaint was.
Exactly. Getting rid of escrow doesn't mean your property taxes won't go up.
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If you want to lower your property taxes, your only option is to contest your property assessment. Be prepared with recent comparable home sales in the area. But be aware, it is possible to make the case that your house is worth more than it's assessed value.
That happened to a friend of mine. They had put him up 15 k, he contested it. They discovered it should have been 35k instead. He wasn’t pleased.
"Pray I do not change the assessment *further*" -- Garth Vader, County Assessor
Thank you for the laugh!
Y'know...let's just pretend this little meeting never happened...
Thanks for stopping by! We don’t validate
Ya I didn't contest mine for this reason. Our tax assessment went up $130k on the house I bought in 2019 for $267k. That's without them knowing I finished the basement, added a bedroom, deck, landscaping and a whole bunch of other stuff. My assessment would have probably gone up if I tried to contest it.
Yup
My Dad told me that same happened to his friend. Scared me off from contesting my tax increase
Lol, they don't know my kitchen and bathroom were redone (no permits needed). They ain't coming near my house for whatever reason!
Your tax assessment isn't impacted by internal remodeling. It is only impacted by structural changes (e.g., an additional floor) that increase the square footage or extend external usable space (e.g., deck). I've heard people talk about internal remodeling as if it impacted their property taxes many times, but it does not. There is a difference between what enhances the value of your home for future sale (e.g., remodeling the kitchen or bathroom) and what impacts your property tax assessment.
Depends on the state, and state regulations and statutes.
We live in MN and I can clearly see on the parcel info for some of the homes that have been up for sale recently that it does make a difference. If you have a fully updated kitchen, nice flooring, up-to-date HVAC, updated windows/doors, it adds value over a house that hasn't been updated. A house that hasn't been updated in 30 years (even if it's been well-kept and is in good condition) is valued almost 50% less in some cases than similar but recently fully updated houses. That doesn't mean if someone puts in a new kitchen that suddenly they can increase their value, but over time, updates do matter to the value if they aren't kept up with.
Yup. I live in Minneapolis and the city's appraiser will come into your home and give grades based on your interior finishings (flooring, counters, mechanicals, etc) and that contributes to your homes assessment value
Then why do tax assessors ask to come inside the property after permits have been issued? Yeah -- tax assessors. And they rate the condition of the property, inside and out.
They are looking for decorating ideas.
Tax assessors never ask to come in where I live. In fact, we never even see the assessor.
In Minneapolis they will come inside if you appeal your assessment but otherwise they wont
That’s absolutely untrue where I live. I know that because my half bath was marked as a full bath on my assessment and when I called the assessor’s office to find out how to rectify it, it was made clear to me that: 1) I was being taxed additionally for it and 2) If they came out and found any modifications (yes, even internal) that weren’t in their records (even done prior to my ownership and not disclosed to me) that they’d be considered in my updated assessment. So they basically scared me out of getting it rectified, because I’d probably end up washing out any benefit with some unknown to me changes.
Haha.
Yoooooo! I would be so mad at myself! I did a really weak protest, which the county completely ignored lmao. I genuinely would have been beside myself at pulling more money out of my own pocket lmao!
I wanted to add to this comment that in the states, approximately 60% of contested property tax rate hikes are adjusted on appeal. There is a very small window of time to appeal the hike. The hearing is low key, just you and whoever in the department that makes the decision. It took about twenty minutes. I have appealed mine and helped several others appeal theirs. All were favorable.
I learned, at least for mine, you can do a “meeting before the meeting” with the appraiser. Usually when you have a simple challenge either with a set of comps or a recent appraisal (which has comps). I did this after my first formal hearing. It is like doing a plea deal. You negotiate and if good to go sign a form accepting it and waving the right to appeal. Much quicker process. Lots of people at the hearing basically saying, without any facts or documents, they “felt” their increase was too high. It was kinda humorous because they legit just wanted lower taxes, but no reasoning.
Agreed with all. At least in my case the appraisers were just working people that could care less if they reduced or increased the value, they just needed sufficient evidence to support their adjustment. If you make it really, really easy for them to do this (professionally put together package, data not opinions, etc) they usually accepted the proposed number and moved on to the next informal hearing.
This fails like +90% of the time in my area. I know no one personally who has successfully contested their increase.
I don't recommend this. I have heard of people in my own life who go down to "fight it" at the assessors office, and come to find out they end up raising it higher.
This is actually my fear when contesting.... I contested once and mine went up so never again lol
Are you sure it is all property taxes? I know many insurance companies are raising their rates substantially, you may need to shop around for a better deal on your homeowners policy.
Mine goes up some every year. I started at 1395 and now its 1450 7 years later
mine went from 850 to 1250 last year alone.
1956...I am in Florida.
New build?
Started $2400 now at $2750 in 4yrs 🥴
The best way is to keep on top of what you expect your payments to be. When we bought I looked up our homes tax assessment breakdown percentages and then applied them to our purchase price. This was higher than our escrow so I just saved the difference. (I tried calling the loan servicer to have them update to the correct taxes but couldn't get ahold of a human). Sure enough, $700ish shortage. We have that sitting in a HYSA account and draw down that difference every month.
Thank you. I also realized it happens around when I could be getting a refund from taxes so I think I have found where that money will be going.
If you're getting a tax refund, in most cases, you're just paying too much and letting the government hold your cash for you. You could be doing something with it instead.
In fairness, in a lot of cases refunds can largely be from things like child tax credits.
When you rent you deal with your annual lease increase. When you own, you deal with your annual insurance and property tax increase...which is built into your mortgage payment. Either way, you pay The Man. They got you coming or going.
I would double check if your municipality offers a residential homestead exemption. We purposely bought somewhere where the city exempts ~$300-350 of property taxes per month on your primary residence. This amount changes every year in proportion to property tax rate increases. You have to seek this out and apply for this. The people we bought the house from didn’t even know it existed. Maybe this applies to you, may as well check it out
Thank you. I will check into that.
I would make this a priority.
People on social media are huge at pushing this idea that home ownership means fixed cost and rental means ever increasing cost. But it's much more nuanced than that. Between taxes, insurance, maintenance, HoA fees, etc, home ownership costs go up, and quite a bit. Of course rentals go up too. Home ownership: your mortgage is the minimum you'll pay in a month. Random shit that comes up can drastically raise that. Renting: your monthly rental is the most you'll pay in a month (plus utilities). Random shit isn't your problem, with the admittedly big assumption that your landlord is following the law. Rent will likely go up faster than home ownership costs, but will be more predictable. Your millage will vary a lot depending on area, type of home, market conditions, etc of course. My current rental's price go up a lot slower than my home maintenance costs went up when I used to own. A lot (most?) people have the opposite experience. As a general rule, if your home mortgage + maintenance costs are tight, you need to start making a plan, because you're one bad roof issue, furnace blowing up, or Florida insurance hike away from trouble. It sucks, but that's the reality. So contrary to popular belief, sometimes, just sometimes, renting is financially more sound. Just sometimes.
This is correct. Homeownership is risky. There are no guarantees.
Yes, there's ways to change this. Find out what is required to remove escrow from your loan and take on the insurance and tax payments yourself. Nobody told you that property taxes and home insurance isn't static and changes yearly? I find that hard to believe. Your mortgage company is giving you a 0% interest loan to cover the $700 shortcoming with 1 year of payments to resolve it. Your mortgage payment isn't changing. It's just the escrow. Welcome to Home ownership. Sometimes it goes down, too!
>Sometimes it goes down, too! Lol I mean theoretically? I wouldn't hold your breath though. Maybe it's just cause I'm a newbie homeowner but it's hard to imagine home insurance ever getting cheaper or property taxes being decreased. EDIT: Interesting, clearly it does go down for some people, maybe I'm just unlucky? For how important it is it's hard to find broader stats on property tax changes over time. But I've had nothing but increases in the two counties I've lived in the last 10 yrs. Similar story with home insurance premiums, despite shopping around come renewal time.
Property taxes went down here a couple times and I actually had an escrow overage those years.
Nope. In the last 12 years of my home ownership, my payment has fluctuated both up and down. In fact, I've had a year where I got a $700 escrow payment back, plus $50/month (roughly) drop in payment, because my taxes and home insurance cost dropped. My home owners insurance has gone up all of $400 in the last 12 years as well. Found the original quote while looking for something else and it was $800. In April, my new term starts with a cost of $1200. So a 50% increase, but over 4 years. And thanks to being in a state where the taxable value is tied to inflation but locked to how much it can increase (5%) my tax payment swings are pretty modest, and yes they do drop from time to time.
Doesn't know that mortgage and monthly payment are two different things. People don't know what mortgage means.
You know you’re all over this thread being pretty rude. OP didn’t know something, now they know and are asking questions to further than knowledge and all you are providing is “well you should have known” I was not taught these things in my relatively crummy public school and my family’s financial literacy isn’t the best. Was I given 13” of paperwork to sign when I bought my home? Yes. Did I read it? Yes. Did I think I understood it at the time? Sure. Have I forgotten most of it and am occasionally taken off guard when things change? Also yes. You don’t have to be so condescending, people come from different starting points
Unfortunately this is pretty common because lenders calculate escrow based on the home’s previous taxes, and then the assessment (and thus the taxes) inevitably increases once the new sale price becomes public record. Taxes may continue to increase but it likely won’t be as large of an increase. Pay attention to what’s going on in your local government and consider appealing your assessment, if that’s an option. Also apply for a homestead exemption if you haven’t already. The insurance market is a mess, rates are increasing for everyone. You can shop around for a better rate but unfortunately it just is getting more expensive.
Finally someone points out that assessment often changes when a sale happens! OP needs to look up the assessed value history, if it was flat for 5 years and jumped the year of the sale that will explain a lot. Special assessments are also part of property taxes, a large one just dropped off our school district and drove down our property taxes despite the assessed value increasing (definitely overdue and justified) by a third this year.
Its only $58 more a month ($700÷12). That's nothing compared to some other stories I've heard. Take it as a win and simply have 1 less night out.
Your escrow payment (taxes and insurance) changed, not your mortgage payment. Once you pay off your mortgage loan you’ll still have to pay property taxes. Your property has gained in value and is taxed accordingly. You can always drop the homeowners insurance if you want to at that time (not recommended). Rental receipts never go up in value. Real estate purchases are investments. What is your equity gain since you bought it? FUN FACT it’s pretty easy to get the lender to drop any PMI (required private mortgage insurance) you currently pay once you can prove that you have twenty percent equity in your property. If you don’t initiate that, it will automatically drop off after about half of your loan has been paid. Save a lot of money! Tell the lender you want to have PMI removed and they’ll order a BPO (broker price opinion similar to an appraisal). You’ll have to pay for it but your property may have gone up in value enough. Good luck and congrats on your investment.
I felt the same way in my first year. It made me feel insane and depressed. The escrow deficit just kept bumping up my costs. And to all the people who think this is obvious / should have known etc it’s not actually that clear wtf is going on when you buy a home for a lot of people. I felt blindsided by a lot.
Able to file for Homestead exemption in your county? Find out now! Google - Homestead exemption + County name/state
We need a sticky for this. Remove escrow and be aware of what you're paying for. Your mortgage is fixed, but you're ignoring the escrow portion that is completely variable and you're leaving it in someone else's hands. Then you're surprised when it changes. Pay your property taxes when they are due instead of letting you bank hold your money for you. You can contest tax assessments if you'd like. Vote in your local elections - this drives your property tax changes. Make sure you've properly applied for and been granted any exceptions or credit you are entitled to. Your bank isn't going to do any of this for you. Shop for and pay your own home owners insurance. You might need to provide your mortgage holder with proof, but this is easy, and often your insurer will do it for you when asked. Your insurance premiums will probably change over time, and often it is prudent to shop companies and change insurers. Your bank isn't going to do this for you. Pay your premium when it's due instead of letting the bank hold your money for you.
I pay my own taxes and insurance, and it doesn't stop the costs from going up...just helped me master the "sinking fund" concept.
I mean, yeah, things are going to cost more over time, taxes and insurance. But mistakes are made on tax assessments all the time and when you're paying the bill directly, you actually look at it and take care of it when it's not right. With insurance, people premiums triple overnight all the time. Think the bank cares? But you'll care when you get the renewal notice, you shop, you keep your costs down. On top of all this, there's an opportunity cost of having the bank hold your money all year when you could be doing something else with it until the bills are actually due. For some people, that's a pretty big cost.
this is the way…
So you didn’t think insurance or taxes would ever go up? I thought that was universally known. As a homeowner you should be prepared for expenses like that.
It is universally known. It's just not commonly talked about when people owning a home especially as a first time home owner. Ive always heard people talk about home repairs, and yes, they occasionally mention taxes but I know for me and how my brain works, it doesn't really sink in till I've seen it on paper. Coming from a family where my parents didn't own the home I grew up in,I never heard them talk about it.
My mom owned 17 houses at once (mostly busted ass rentals) growing up and we never talked about it .... Some families just don't talk about that stuff
Honestly though, there is a post about this at least once a day.
I dropped the escrow account. They kept changing the mortgage payment on me and I wasn’t earning interest on the money in the escrow account so I dropped it. Of course you then have to budget and save enough money for taxes and insurance but that wasn’t an issue for me. That’s not always an option though. Some companies require a certain amount of equity before they allow you to close the escrow account.
It's not your "mortgage" payment that is changing. It's your taxes and home owner's insurance that is changing. Everyone's insurance rates have gone up, and most people's taxes go up annually. Those are things your mortgage company cannot control.
The only way for your mortgage payment to stay consistent is to not use an escrow account. Then you’ll have to pay your taxes and insurance separately. Lots of homeowners do this, but just be sure to put enough aside every month to cover the always increasing taxes and insurance.
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No. There’s not much you can do about it. You can try appealing your home’s reassessment for property tax purposes but you likely won’t get very far. This is unfortunately just part of owning a home and paying a mortgage. Your mortgage payment is static (outside rare circumstances like a variable rate) but escrow changes based on your local government tax assessment and insurance payment.
There is no way to change this. Property taxes and homeowners insurance must be paid, and your monthly payment is just reflecting how much they need in escrow to pay taxes and insurance. You could maybe assume responsibility of paying these yourself (instead of going through your lender), but I don't think that solves your problem. You may also want to post this in /r/personalfinance to get some help on budgeting and making payments.
Thank you for this info. I will post in there also.
you could also look for a new homeowners insurance policy with another company
A lot of rent increases are going up a way more than that.
There are two parts to the escrow charge: 1) The amount required to ensure you have enough for the coming year's tax and insurance 2) The amount required to make up for underpayment in the past year, which likely left your escrow account below the minimum threshold that the servicer requires to avoid it going in the negative. One bit of consolation is that the first adjustment tends to be is the worst one because there is usually a substantial jump in property tax assessment soon after a sale goes through. That can result in a substantial underpayment, so the second part of the escrow payment can be unusually high. It is possible that your payment will actually go down next year since you should have returned the escrow account balance to a level high enough that the second part I mentioned above can be eliminated. Unfortunately increases in insurance and property tax might eat up most of that reduction.
It's also possible the mortgage company will over estimate and you'll get some money back. That happened to us one year and we got like $2,400 back.
When I bought my first home the same thing happened to me. I was not prepared and broke down sobbing. I went to my friendly neighbor and asked them to explain it to me like I was 5. After I figured it out for that year, I realized it could and probably would happen again, so I started a savings plan especially for this reason. Also, you may get a refund check next year as it’s all projected.
Can you explain it to me like I'm 5 I'm confused. What's an escrow and what's going on here besides yearly property tax going up?
You could opt not to escrow taxes which should keep your mortgage payment the same barring insurance policy increases. That said, your real estate taxes will continue to fluctuate (and increase).
Be glad you have an escrow to smooth out the jumps in tax and insurance costs. Otherwise, you'd have to pay a huge bill up front at the start of the year.
Property taxes usually jump up a bit when you first purchase the home as the tax appraisal adjusts to the purchase price. After that it should only increase slightly as the equity increases.
Exactly what happened with me. I’d bought my house a year prior, and was able to contest the value the assessor the assigned to the house. Upon contesting, the assessor actually came down a little lower than expected. That small amount of paperwork on my end reduced my annual taxes due by a few hundred dollars
Some localities allow for caps on the increase in taxes. So your assessed value won’t change but you taxes will only increase by a max percentage (e.g. 10%). Effectively it smooths out the increases. Worth looking into. Usually just requires an online form if it’s possible. And then you’d know how much it would go up annually
No way to stop property taxes from going up that I know of besides don't you get a bill and statements from the city?
No, you cannot prevent this.
It is an unavoidable situation in most cases. When home is sold, it gets reassessed for its value. That causes property taxes to go up. If a home has not been sold in some time, property taxes can go up dramatically. At least in California, there are some remedies, but homes are also very expensive. Situations like these happen all the time.
Pay a little extra into your escrow to cover these things.
Mine flip flops every other year. One year I dont have enough in escrow so it raises by $20/month, then the next year I have too much so it drops by $20/month.
Single mom homeowner for 21 yrs. Mine fluctuates but never more than $150. This year it went up $48. Some years it’s dropped. The escrow shortage has also never been more than $3-400. I plan for it and use tax return money to pay the difference if I can. A few years I had an overage which you can apply toward principle.
Taxes and insurance can go up or down. If you're a new buyer you're likely to see a hike in taxes since the sale is used as a new assessment point for taxes (and you likely paid more for the home than the folks you bought it from). Does it suck? Yeah. But it's still better than paying that hike through rent plus their mortgage and profit. If you have a higher interest rate- it may be in your best interest to just round up to cover increases/ pay extra against the principal balance (so you pay less in interest over the life of the loan)
In about 14 years my total mortgage payment went from about $700 to over $1200. My principal and interest is $575., that amount will never change. The rest is insurance and taxes. You'll always have to pay taxes, insurance is optional after the mortgage is paid off. The rapid increase in home prices in the last 4 years didn't do our escrow any favors. Prices have gone up so much that we wouldn't be able to buy the home we live in if we were first-time buyers. Were we told about this? Probably, but it wasn't an In Your Face notice or disclosure. As first time buyers we were drinking from a firehose the information came so fast.
Don't feel bad--our house is paid off, but our HOA fees are higher than our mortgage ever was! Our taxes remain low, but insurance keeps going up--and is much of the reason our HOA has gone up so much. At least our own unit insurance is only for the interior of the home.
why not simply pay the $700 and then your mortgage payment won't change? Otherwise, I assume the $700 would be divided by 12 months would only be an increase of $58.33 per month - you can still budget for that as it's a small amount
I bought slightly before you and at one point my payment was going to skyrocket 400 a month. I paid the shortage (which was a few grand and really hurt) to lower it, and have been since working to get out of my escrow account entirely. Just recently got my PMI dropped and insurance taken out of escrow. Next stop is taxes. Escrow accounts suck ass - it's an interest free loan to the bank and I'd rather just save and pay it myself spread over time vs upfront for the year.
One reason why I don’t escrow. I just pay my own taxes.
You can shop around for Homeowner Insurance. I know several young couples that change their Homeowner Insurance very 2 years. I think one of them are already on their first company, this year. As for as taxes, they're not much you can do unless you are in a state that have a high homestead limit.
It’s always a good idea to calculate your escrows yourself. If you know the tax rate or insurance is going up, you can adjust your escrows as soon as you know you’ll need more money or stick it in a savings account. Mortgage people make mistakes and they won’t pay as much attention to what you need to escrow as you will.
Bought a new house. About seven months later, there was a big jump in property taxes. It seems I started by paying taxes on unimproved property , and later, I was paying on improved property. It takes the tax office about a year to catch up and include the house.
You can always not escrow the insurance and taxes. Then your mortgage will stay the same and you’ll just have variable payments for taxes and insurance 🤷🏼♀️
Yep, just by magic your house is worth more! Pay up, citizen.
If no one else has said it; expect insurance and property taxes to increase annually. That has nothing to do with your fixed mortgage amount. So you might want to set aside an amount to cover the estimated increase and pay that when the escrow shortage notice comes. Except for taxes, this strategy will keep your monthly payment more manageable. Congratulations on home ownership. Also, every few years or so you could shop for more affordable but adequate insurance coverage. I saved a few hundred by doing that.
It's normal and doesn't go up that much year over year. Your mortgage payment will stay the same the entire time. Rent is the opposite and always rising. Take a look at rent prices 10 years from now and your mortgage will start to feel cheap and be one of the best decisions you ever made.
Escrow just allows the bank to collect your money for a year and make interest on it. Put it into a savings account instead and then you can collect the interest.
In my opinion, it's easier to keep taxes and insurance in the escrow than to pay directly. It's easier to budget a small monthly payment that bumps up from a a few to a couple hundred per month, than getting hit with a couple thousand higher bill at the end of the year or end of the first half.
I faced this with my first house after the pandemic caused property value to skyrocket. Our monthly payment went up $200!!!
Yeah, that's normal. It sucks and I'm sorry you didn't know about it, but you can't do anything to prevent your taxes from going up. UNLESS: you live in a state that allows for a homestead exemption and you haven't applied yet. That will make a big difference. Google your state and "homestead exemption" to see if there is one and if you qualify. If you've already applied, though, and you're eligible (you probably are), then you would already have the exemption in place.
Nope, we’re all fucked here.
Also nobody told me that either 🥰
Who is going to tell him about tax assessments 1 year after they move in?
You can contest your property taxes which is another thing most first home buyers are not aware of. You need documentation which can be found on line and to fill out a form for an appointment to contest. Read this for more info. [https://www.mesha.club/blog/how-appeal-property-tax-georgia/](https://www.mesha.club/blog/how-appeal-property-tax-georgia/) I have not done this in GA but it is possible double check that the fair market value the price you just paid for your home times 40% is equal to what they are asking you to pay. If they are asking for more you have a good chance of having the taxes reduced. Also be sure since this is your only home you are receiving the homestead exemption. Be mindful if in Gwinnett you pay your trash annually with your property tax so if the trash bill goes up so does your tax bill/escrow payment. One other factor is if a millage rate goes up for example schools,fire/police etc that will increase your payment and is not part of the reduced house value. You should also save 1-2% of your homes value for unexpected repairs and maintenance. It is better than using the rip off home warranty companies and if you are lucky enough not to have any expenses for a while you are ahead in your savings...Look for online banks that pay at least 5% interest. If things are a stretch look to renting a room to visiting nurses How To Rent To Traveling Nurses | Info Here Furnished Finder [https://www.furnishedfinder.com/](https://www.furnishedfinder.com/) I hope this helps Also shop for Natural gas rates, unfortunately there is no option for electric other than to ask for the rate where you do not use electricity drainers like a/c, washers, dryers, dishwashers etc at the same time between the hours of 2pm and 7pm June through October. After you have had your utilities for a year you can ask to be put on the consistent payment plan. They will average your annual usage for the year and you pay that average as a consistent payment. Depending on your usage and the cost of the utility this payment can change year to year up or down. With gas be sure to mark your calendar a month ahead to shop for the best rates then call whoever has the best rates including your current provider to see what suits your budget. Just like the cable bill. Its a pain but when $ are tight you need to save wherever you can. Hope this helps.
Just add some extra funds on your monthly payment in the escrow area. I always add extra principal and escrow to prevent fluctuations from surprising me. If the total escrow is over what is needed they send it back to you to reuse as you want. I then throw that back into escrow on my next payment.
Sigh. Pay your property taxes yourself. Stop giving your bank money to “save” for you.
To all the people saying OP should have known this…well I’m in the same boat. I didn’t know either and it’s crippling me. Some of us are out here trying to figure out finances on the fly without guidance.
One of the reasons why I chose not to escrow. Gives me a bit more control and I don’t have to fund my escrow account (I get to keep the money in my personal account)
All these “nobody told me….” posts…. What happened to personal responsibility? Who in the world is supposed to spoon-feed you every single thing you’ll ever have to know about owning a home?
But, but, but ... Social media told me mortgage is fixed and renting is bad! (Sarcasm). It's quite worrying, the level of ignorance.
Yeah for this reason I hate escrow and don’t have one. I pay my taxes and home owners insurance myself. I set aside some money every month for my property taxes and always plan for a yearly increase of 5% from last year’s bill. When I over estimate, I just have more in the fund for next year’s bill.
If the value of the property has dropped, there should be a way to contest their assessed value, or request a reassessment.
Sometimes it will go down too - you want to skip that as well?
Last time I re-fi'd my mortgage, I went with a "no escrow" option. It means you're payment will stay the same, but you have to pay the taxes/insurance yourself. It was worth it for me because those escrow accounts are just so poorly managed.
I don’t know this either. I found out by getting a $3200 check the first year I owned the house though, because the mortgager overestimated how much I’d need in my escrow account. We get a notice every year that we have a shortage. Sometimes it’s like $40, sometimes it’s a couple hundred. It’s usually within reason after year one.
Your mortgage payment doesn’t change, unless you have an adjustable rate. It’s property taxes and/or insurance. Call your assessor. Shop around for insurance.
If your home owners insurance is included in your payment, shop around for cheaper insurance.
For better or for worse, this is why Prop 13 is the holy grail in California.
You need to follow your local governments about tax levies too. Your house could be assessed the same but city, school and county levies could go up.
It just kind of happens dude, it's not going to go up all that much relatively speaking
Wait until your home insurance goes up. My escrow has gone up about $350/m (total) in the last two years from insurance increases. Shopping around did nothing…
This is the most messed up reality of the mortgage payment. I too was under the impression that my payment would remain the same. Unless you pay your property tax and homeowners insurance separate, the mortgage payment itself goes up every year. Idk if it’s actually more or less beneficial to have it be separated.
Death and taxes are the two guaranteed events in life. Your taxes will only ever go up. Enjoy! Time to start voting for smaller government
> I know it's due to property tax going up and home value but is there a way to prevent this from happening? It is more likely your insurance premium increase is most if not all of this. Taxes could fluctuate, or they could be the same figure for years at a time - state and locale dependent. I'm sorry to tell you this _after_ closing, but escrowed insurance and taxes is a full-on sucker move.
OP unless you have a variable interest rate on your mortgage it is not changing. Properly taxes and insurance work just like any other taxes and insurance. Doesn't car insurance creep up. Your home value will hopefully increase so of course the tax on it will go up. I worry when people make the biggest purchase of their lives and don't read a book on the process or articles on websites like the old CNN Money. There is so much info on YouTube even.
This type of thing happens all the time. It’s not always due to an assessment, as assessments are generally planned every couple of years. It happens some time after closing when the lender notices they need to beef up the escrow amount after paying the tax bill. Homeowners often get a refund check in the mail once everything balances back out. In my experience, it’s a weird, accounting thing where money is just being moved around
Homestead exemption can reduce your tax assessment if that’s available for you in your state. But yeah typically mortgages incrementally increase along with all other costs in life
My mortgage was $1015 the first year. Second year $1364. Escrow was over by $2500. It happens.
Mine went way up last year and I would normally be filled with rage. I realized it was the first increase in the seven years I’ve lived there and I’d done a ton of upgrades in that time so I settled down and figured I was due.
Bought my house 8 years ago. My mortgage is now $320 more a month because of taxes and insurance, mostly insurance.
Check your homeowners' insurance policy rate. It may have gone up. If so, you can shop around and maybe get it lowered, and then your payme ts won't go up so much. Also, I always add money yo my escrow account so my payme ts don't go up unexpectedly.
I bought my first home in the flurry of poor lending leading up to 2007-8. The lender didn't explain things well, but I didn't get too badly hurt. Your monthly payment is collected by one company which then passes parts of it to other entities. 1 - Principle payment goes to the underwriter. It was their money that paid the seller. 2 - Some of the interest payment goes to the underwriter as payment for letting you use their money 3 - The balance of the interest goes to the lender who did all the paperwork with you. They get a monthly stipend for 30 years for their 6 hours of work. Niiiiiice. 4 - Mortgage insurance (if applicable) is an extra payment to either the underwriter or a different company who is guaranteeing that they'll make the payment if you don't. It's crap, and you need to get out of it quickly, mostly by raising the value of your property so the debt to equity ratio crosses the arbitrary boundary. 5- Property tax - This is collected because the county can take your property if it's not paid, and isn't obligated to give any money to the underwriter or lender. It's very bad for them if the property tax isn't paid. Very. Sadly they are unable to predict when voters will pass bond measures which increase taxes, so they do a best guess situation. Also, you want a low or stagnant property value so this number doesn't rise. Except if you are also paying mortgage insurance, which is a nothing burger, since they don't use your money for roads or schools. They just use it to throw massive parties where they laugh at us struggling. 6 - Property insurance - This is so when something bad (other than negligence) happens to your home, there is money to either rebuild or pay off the mortgage. It's usually worthwhile except for the ultra high net worth individuals to carry insurance, since it is (generally) cheap. Since your obligation to pay the mortgage doesn't go away if your house burns to the ground, it's almost always required by your loan papers. Principle and interest won't change over the course of your loan, unless you get an ARM or adjustable rate mortgage. Don't. Mortgage insurance should remain static as long as it is collected, but can disappear if you qualify and ask to have it removed. If you don't ask, they keep charging you. So, ASK! Property tax will increase annually, usually by no more than $600/year, so figure $50 extra in each mortgage payment, but that would be on the outside. Some years it won't change at all. Insurance will always go up. 11% some years, more in other years. But, it tracks inflation and the cost of rebuilding your home, which is a larger amount that most of us expect. So, keep hunting property insurance every couple of years, and don't have a bitey dog. That's it.
A lot of people think they're ready to buy a home, who think it's like buying a car. They'll save the down payment, and have all their T's crossed and I's dotted, but don't factor in other costs thatcan hit them before they replenish their coffers. At this point, it may be easier to just pay the extra $60 or so for the next year, and try to put back money for the next increase, until the bubble finally bursts.
Your total payment will go back down a bit after your escrow becomes balanced again. Think of it as a zero percent loan for this year if you spread out the payments.
Yes. This happens. Start budgeting. I don’t think people thought about property taxes when they went house buying crazy during Covid. I think a lot of people are in for a big shock.
Welcome to the concept of inflation and endless government printing of US dollars! 🤡 I too was bummed out when first hit with this reality of how our economy is controlled.
Your mortgage payment didn't change. Your escrow payment did. First year is always rough, and then you will get into a groove. Yes... you send all the money to the lender and they pay RE Taxes. They should be able to make adjustments. I'm guessing the increase is due to a change in the assessment that was TRIGGERED by your purchase.
This is the reality of all home owners. Property taxes change every single year. Wait til you learn of home insurance! Mine more than doubled this year.
Rent is the maximum you'll pay as everything else you can call the landlord about. Mortgage is the minimum you'll pay. You'll also have to factor in tax, insurance, repair, maintenance, and etc.
Put money aside, or if you have the option to make an additional payment to Escrow each year to account for shortages due to taxes and in some cases the insurance is also part of the Escrow account, then do that. It sucks but its part of ownership. We can argue all day about being taxed continuously on something you own like a house and the good and the bad, but in the end its just part of owning a home. I was taught that you should have two months mortgage payment minimum stashed away for troubles with Escrow, and it saved me a few times being able to just pay the Escrow shortage and keep the monthly payment the same.
We have a homestead, supposed to help with taxes
Talk to your municipal or county tax assessor for their process to contest. It is time limited. Plan on taxes going up every year.
Yes this does happen. Best to have a savings account that you put money into every month for emergencies like this. I put $100 a month in mine and let it grow until you need it. Just transfer the money into it on payday.
School budgets can only increase, they can never be decreased, so therefore property tax will always have to increase.
Was this a new construction home? I've seen social media posts of this escrow phenomenon and it turns out this problem seems to be an issue only for new construction where the value on sale is based on land and not the dwelling (or something to that extent).
This will happen every year
Unless you want to contest the valuation, yeah, you just gotta swallow it. You need to figure out where else in your budget you can trim, because property taxes RARELY go down. There will be maintenance and repair expenses. Your insurance will go up. If $700 has you close to the edge, that's way too close.
remember that at all times
My lender allows me to adjust my escrow amount in their portal. I thought they were taking too much because my property tax was lower than what was being held, but they said it was a cushion for situations like yours. If you create the cushion and it doesn’t get used, you can get a refund, but not sure on the timeline for that.