Home Insurance Policy vs. House Payment??

[GRILLMASTERNEEDAHOUSE]

Hi,

Here is what I don't get. My mortgage payment is going to include approx $150 a month for home insurance that obviously is going to go into the escrow along with my taxes. So for example, if my actual home insurance policy is $125 a month that is billed to the mortgage company, what happens to the extra $300 overpayment at the end of they year? Is it reimbursed? Some tell me, it stays in the escrow until its closed out. If I don't get it back, it would seem worthless to shop for lower premimums rather match my coverage and premimums to the amount I'm mandated to pay in my mortgage payments?

Can anyone clarify this? Thanks!

[rockymtngrl]

Your escrow account will be analized once a year and adjusted accordingly. By law they are allowed to keep a certain amount in the account as a buffer. Depending on the amount of the mortgage and state law this could be a couple of hundred dollars. If its over by a lot then they will send you a refund check and/or adjust your mortgage payment. Same if it is under they will either ask you for a check and/or adjust the payment.

[Desert-Rat]

I am taking that to mean a Home Owner's Policy.  (Not PMI)  You didn't mention property taxes but I'm including those also.

In this case, if you have a fixed rate mortgage, that payment never changes.  What does change is:

1.)  Property taxes

2.)  Insurance premiums

The extra $$ you pay each month is held in an escrow account.  Taxes (if paid thru escrow) and HO premiums will be paid from this account.

If, for any reason your property taxes and/or HO insurance increases (or declines) there will be an adjustment made to your total payment for the following year.  (Usually in Jan.)  If your escrow balance exceeds the required amount this will be refunded to you and your payment will be lowered.  If more, it will increase.  (As a result of declining values, (ugh!) my "assessed" value went down this year and my taxes were lowered substantially!)    

If you are required to have an escrow account, nothing precludes you from shopping for a better policy as long as your loan servicer is provided with the details and is adequate coverage necessary to cover your loan.  Your new agency will provide those directly to the servicer.

Were you REQUIRED by the lender to establish an escrow account or do that on your own? 

I wasn't and pay taxes and HO ins. annually, after I earn the interest on MY money.

Hope this helps.

D-R

Message Edited by Desert-Rat on 08-05-2009 12:23 PM

[GRILLMASTERNEEDAHOUSE]

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@Desert-Rat wrote:

I am taking that to mean a Home Owner's Policy.  (Not PMI)  You didn't mention property taxes but I'm including those also.

In this case, if you have a fixed rate mortgage, that payment never changes.  What does change is:

1.)  Property taxes

2.)  Insurance premiums

The extra $$ you pay each month is held in an escrow account.  Taxes (if paid thru escrow) and HO premiums will be paid from this account.

If, for any reason your property taxes and/or HO insurance increases (or declines) there will be an adjustment made to your total payment for the following year.  (Usually in Jan.)  If your escrow balance exceeds the required amount this will be refunded to you and your payment will be lowered.  If more, it will increase.  (As a result of declining values, (ugh!) my "assessed" value went down this year and my taxes were lowered substantially!)    

If you are required to have an escrow account, nothing precludes you from shopping for a better policy as long as your loan servicer is provided with the details and is adequate coverage necessary to cover your loan.  Your new agency will provide those directly to the servicer.

Were you REQUIRED by the lender to establish an escrow account or do that on your own? 

I wasn't and pay taxes and HO ins. annually, after I earn the interest on MY money.

Hope this helps.

D-R

Message Edited by Desert-Rat on 08-05-2009 12:23 PM

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Thanks for the detailed replay. Yes, the lender requires for an escrow account to be established by them for taxes and HO insurance. I didn't know that your payments adjust yearly (depending you increase/decrease of your taxes and HO insurance) and your overpayment refunded back to you.