Why Did My Mortgage Company Send Me an Escrow Check
Many people like fixed-rate mortgages because of the perception that a fixed-rate loan has a fixed monthly payment. In reality, while your lender can pay off excess escrow funds in the form of a repayment check, they can also increase your monthly payment to get back the money they paid on your behalf if your escrow account didn`t have enough funds. This is where things can get confusing. Property taxes and home insurance can and will fluctuate. In this case, there is either a default of escrow or an overrun of the escrow account. A lender is required to send you a statement within 45 days of creating the escrow account detailing taxes, premiums and other estimated costs – such as PMI – for the following year. However, things change when you refinance with another lender. When you complete the refinancing with a new lender, the new loan service provider creates a new escrow account for you. This closes your original escrow account. If the original escrow account is closed, you should receive a cheque for the remaining balance.
Once the real estate transaction is completed and you sign all the necessary mortgage documents and documents, the serious money will be released from this escrow account. Usually, buyers get the money back and apply it to their down payment and mortgage closing costs. Once completed, the loan manager will receive monthly payments for the escrow agreement, which will allow the business to have enough money to pay taxes and insurance when they fall due. For example, your local tax authority may require property tax payments twice a year, and insurance may be due annually. The credit manager would receive these invoices and pay them from the escrow account. If you are not in a hurry to get the money back, you can always wait a few months. Most mortgage lenders do a fiduciary analysis a few times a year, and the company will notice the overrun. But if you want your money now, you qualify for it under RESPA and you can apply for it by contacting your mortgage services company. This transaction can come into play if you have paid off your mortgage and there is still a balance in your escrow account. That`s why you may hear the acronym PITI when lenders talk about your mortgage payment. PITI represents all parts of your monthly mortgage payment: principal, interest, taxes and insurance.
Most lenders require – or at least encourage you to have an escrow account, especially if you make a down payment of less than 20% of the value of the home. Many government-backed mortgages require an escrow account, regardless of your down payment, including FHA and USDA loans. If you qualify for an escrow repayment cheque, the loan service provider will most likely issue a cheque after the required annual analysis of the escrow account. The schedule can be any month of the year, but during this review, credit managers will verify that your escrow payments match the bills paid by that account. Don Rafner has been writing professionally since 1992 and has been published in ”The Washington Post”, ”Chicago Tribune”, ”Phoenix Magazine” and several magazines. He is also the editor-in-chief of Midwest Real Estate News. He specializes in writing about mortgages, personal finance, business and real estate matters. He holds a Bachelor of Arts in Journalism from the University of Illinois.
A refund of any kind sounds good. However, to fully understand what an escrow refund is, it is important to understand what an escrow account is. You may also receive a repayment cheque if your lender completes your escrow assessment and determines that you have too much money in your account. This is often referred to as overshoot or excess escrow. For example, let`s say your property tax bill was reduced in July. Since then, you`ve consistently paid your mortgage payment in full. With this, you should have extra money in your escrow account when an annual escrow account analysis is done in December. At this point, the credit manager can issue a refund check. However, you may need to apply to receive the refund cheque.
Because the lender`s estimate of your taxes and insurance premiums can`t always keep up with costs, the loan manager performs an annual escrow analysis and tells you the estimated and actual costs. .