Shocked by the increase in your monthly mortgage payment? This is why he jumped [South Florida Sun-Sentinel] – InsuranceNewsNet

Many owners across South Florida are in sticker shock when they receive escrow shortage notices, after mortgage lenders told them their monthly payments would increase.

This was the case for Kenneth Rankel58, and her husband when they received notice from their mortgage lender last week that they had a shortage of escrow due to rising insurance costs and as a result their monthly payment would increase by ‘around $323 a month.

“The insurance company sent us a notice in November that the insurance was increasing,” Rankel said. “I just wasn’t too sure how much it was going to cost.”

The couple are not alone. Primarily due to rising insurance costs and, in some cases, rising property taxes, many homeowners are receiving notices that their monthly payments will be significantly higher this year due to a shortage of trusted third party.

“I’ve probably personally had half a dozen calls so far in the last month about what’s going on,” said Stephen McWilliampresident and broker of Florida State Real Estate Group and Florida State Mortgage Group. “They don’t understand why it happened and they just see their mortgage payment go up.”

What is an Escrow Shortage?

A homeowner’s mortgage payment consists of two parts: the actual loan amount (principle and interest) and the bill portion in escrow.

The escrow payment is the amount that is used to cover costs such as property taxes, home insurance and mortgage insurance, plus a little extra as a cushion to try and ensure the account doesn’t go into negative . The mortgage lender will collect the estimated amount of property tax and insurance each month in anticipation of the annual bill.

“Typically, the bank or services will send an escrow analysis every year. This will show you how your escrow account performed last year and if you were locked in enough to cover tax and insurance costs or was it just enough,” said JC de OnaSouth East Florida section president of Centennial Bank.

Some years there are not many changes, but other years owners may receive notices of an escrow shortage, or a notice that there are not enough funds in the account to cover this amount due, due to an unexpected increase in insurance or taxes.

Let’s say an owner was saving $200 a month in their escrow account because their insurance bill was $2,400 one year. Now when the new year comes their home insurance policy has doubled and it’s now $4,800 one year.

Not only does the lender have to pay the $4,800 from the outset, they also need to start budgeting for the perceived cost for the next year.

“It’s going to be almost double because they were short last year and they have to prepare for next year. A $200 the difference will increase to $400 because you were short last year,” said Craig GarciaChairman of Capital Partners Mortgage in Sources of coral.

Double increase: property taxes and insurance costs

For owners who have received escrow shortage notices, the most likely reason is due to increased insurance costs.

“What I see this year is insurance costs going up,” de Ona said. “Overall, we are seeing increases of around 10-20% in insurance premiums.”

For Rankel, the home insurance premium jumped more than $3,000 so that the year costs them a little more $9,000.

And Rebecca Hawronsky and her husband, residing at cooper townreceived a notice that his insurance would be increased by 40%.

According to state data, average annual premiums last year were higher than $4,000 in five Florida counties, including Broward, palm beach, Miami Dade and Monroe. Many homeowners have seen their insurance premiums double over the past five years to about three times the national average.

Another reason – although less likely since many homeowners have a homestead exemption – could be an increase in property taxes. This is more likely to happen to a homeowner who has purchased a home within the past two years, or those who might have an investment property.

“Our office often finds that a homeowner’s first tax bill may reflect exemptions accrued by the previous homeowner. The second property tax bill after the new resident has owned the property for a full year would reflect the current owner’s exemptions, and often these savings may be less than the previous owner’s,” the assessor’s office noted. Palm Beach County real estate.

How can owners be prepared?

It is difficult to prepare for an increase in insurance premiums, because it is not known how much they could increase each year. If possible, experts suggest having reserves set aside to account for any changes in policy.

But for many owners, rising costs are forcing them to cut back where they can to make up the difference. Rankel is reworking his monthly budget to reduce it, including getting a cheaper phone plan.

“We are doing everything we can to reduce the impact,” Rankel said.

For homebuyers in general, it’s important to remember that taxes are likely to change on a property they’re buying and to take that into account when buying a home, said Patty DaSilvabroker with Green real estate properties in cooper town.

The Broward County Office of the Real Estate Appraiser has a calculator on its website to help buyers determine how much their taxes will be on the home they are buying, as does the Palm County Office of the Real Estate Appraiser. Beach.

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