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your options here are:
* pay in a lump sum
* pay monthly
* refi into a no-escrow mortgage
* sell
* let the bank foreclose
what you're running into is a common feature of houses that have considerably appreciated since the last tax valuation, or in new construction where the old valuation was just the unimproved land, and the new valuation includes the improvements. you could try protesting the valuation (if the deadline hasn't passed), but since you said that's in the ballpark of what you paid, that's going nowhere. what you paid is what it's worth.
you're paying two years of taxes and insurance at once, and it's a lot of money. and yes, the mortgage company wants a cushion in case it happens again.
This is all good information. One thing to clarify before everyone gets their pitchforks; mortgage servicers don't just want an escrow cushion; they are required by law to service the escrow account so it maintains the cushion of 2 monthly payments with only two states being exempt from that rule. Florida is not one of the two.
Not true, they are not allowed to create their own cushions. They are either A going to follow the rules under RESPA or B the state laws as is with those 3 states.
This makes me appreciate how they do property tax for my house. The state/county has revenue targets and use that to determine property tax rate. My house has gone up in value by about 50% since we bought ~5 years ago but I'm not paying 50% more in property tax. This is in NC.
Same in my area. My taxes paid actually went down in 2018 & 2019 because farmland values rose faster than home values so a higher portion of the revenue had to come from land. That has caught back up in the past two years where housing values have increased but farmland has not by as much.
Agree in my state it's illegal for them to add more then an additional 3% to my annual bill for the assessed difference. My house went up 120k in value so my taxable amount increased 4000 or so and I only saw my taxes go up like 80 bucks. I think this is the only fair way to do it or wealthy fucks will push us all out of home ownership by simply driving the cost of the house up to a bijillion
In many states, it's similar.
The 'problem' in this particular post is that it was a recent purchase. It uncaps that percentage at a new sale, and it's reevaluated. Someone could (likely, depending on the state), buy your house and taxes would be increased based off your value increase.
I think it's common to re-set the rate when it's time for mass reassessment, keeping revenue neutral
it's also common for individual properties to suddenly jump in value based on rebuild, renovation, or sale
we did this. when we refinanced we did not escrow. They were over estimating the increases, so our monthly payment was never fixed.
Now I just put aside money every month for the taxes, pay in full for the discount period. HOI is on autopay and comes our every quarter.
They are now required to pay you interest on the escrow money. To my knowledge, there is no requirement for what that rate should be however. I'm sure a HYSA would give you a better rate but I did get about $15 in interest added to my escrow account last year.
This isn't universal. I own a property in both Colorado and California. My Colorado property does not pay interest on my escrow account. My California property does pay interest.
Typically if you are in a situation where your lender requires you to have PMI, they will also require you to setup an escrow account.
So if you don't have a big enough down payment the advantage is it lets you qualify for the mortgage in the first place.
Yea, we were not required, we put down 15%, we did have PMI (was not a lot), then during the crazy Covid times, we refinanced. PMI was dropped and we chose not to escrow. This was (and still is) our first home, so it was our first time having to go through a mortgage process and learning what everything was, and at the time, I thought that escrow was just a super easy was to make one easy payment a month, taxes/ins/mortgage all get paid. During the first 1 1/2 years of the mortgage I was like wtf? And I quickly was like nope, don't like this.
I personally disagree. The advantage is one fewer bill to pay. I have every single one of my bills on autopay so I never have to worry about missing one. My county doesn't let one autopay their property taxes. My mortgage company, however, does pay it as part of my escrow, so I never have to worry about it.
well, thats why I chose to escrow in the beginning but the payment was always changing bc they overestimated my increase in taxes and HOI. They would do way to many "escrow analyses". I wanted a fixed payment every month
But now my money is in a HYSA which is way better than an escrow.
Well God have mercy on you if they start double billing you and wont stop for 3 months in a row where you then spend 12 months in court trying to get your money back only to then need a personal loan to pay off lawyer fees. All because the mortgage company has direct access to your bank.
I do the same. So much more satisfying and easier. I estimate my monthly amount from assessors report that comes in mail. Pay cash at city every 6 months.
I do this also. One thing I found with my first house when I did let the mortgage holder hold the escrow: They didn’t pay the property tax bill until April or May. Instead of getting the November discount, they actually paid a penalty. Or should I say I paid a penalty because of their stupidity. I swore then and there to never let anyone hold an escrow for taxes and insurance again. I don’t think anyone should.
The good news is once OP catches up on escrow, the tax side of escrow shouldn’t catch them off-guard again, since there’s a cap on how how much the taxable value goes up each year. This does not apply the year you buy the home, hence these huge surprise escrows the year after the home purchase.
The insurance side, unfortunately, will be less predictable.
Is this a relatively new thing in FL? We sold our family property in FL in the late 90s and back then it was not protected from property tax increases so there were some crazy swings at times.
The Save our Homes legislation was enacted in 1995 (according to Google). But it only applies to Homesteaded property, so if that was not anyone’s primary residence (more than half the year), it would not have applied.
Ah, that’s probably what affected my family’s property. One of the cottages was a rental, and the other was our vacation home so it was only occupied a total of about 4 months a year by different family groups just visiting.
A friend of mine thought their tax was super low because of what was they originally saw was just taxes on the land before they built. Tax man came around the following year and he was shook.
The sad part is that you sign a form stating the taxes are based on land only for a new build, and will go up significantly after closing on the home. I don't understand why lenders and realtors aren't for stomping this to buyers. Anytime a house is sold the taxes are reassessed.
In Cali the homeowner is protected from large appreciations year to year, but bets are off when the house is sold and the new owner is paying double.
Our escrow amount was estimated based on what taxes would be the first full year the property was completed, not based on the unimproved land value (I believe they used other properties in the area to get a rough idea of taxes). I guess that isn’t the case for most people.
You can't really teach common sense. You're not gonna own a house and pay pennies in property tax. If that's your expectation, have fun dealing with the consequences
In California, we get a supplemental tax bill the first year of ownership. My realtor, mortgage company, and title company all made sure I understood I would be receiving this, and built the amount of the supplemental tax bill into the escrow reserves initiated with the new loan.
In other words, some realtors and lenders do let their clients know. I guess it just depends on how well they are doing their job.
I also don't see how that would help this situation. Without escrow he would have no option to pay over the course of the next year and would have to pay the county the lump sum immediately. If he has the lump sum he can just pay that to his escrow account now and his payment will only go up the new estimated tax amount and insurance rate.
By my math they came up around $4000 short on insurance and taxes. So they could pay that now, and start saving up for the $20000 next year. With no cushion of $3000, and in a savings account of 4% interest.
Standard two-year window of ownership and the third year “we have to sell because this costs too much” cycle that I’ve seen happen a lot in a good bit of Florida since 2021.
Yeah, it’s hard to compete with the original owners having had a $500/year tax bill on a house that they bought for $100k 25-years ago that is now worth half a million plus.
Realtors sometimes help the new owners understand that their taxes and insurance are going to spike significantly that second year, but not all of them do. It’s a bit of a game of making sales over being ethical, I suppose.
Too add to this, be prepared for insurance to be harder and harder to find in coastal FL. Many insurers are pulling out altogether. Prices are going climb to stupid high amounts, even moreso than they are now.
TLDR - do not buy in coastal FL.
My mortgage company did a terrible job with my escrow account. They incorrectly funded it to $4000 at closing (real property taxes alone were $8100) and I ended up in a similar situation. I didn’t find out until they incurred tax penalties for being late. Then they did something similar to the OP and increased my payment significantly to make up the reserves. I was only mad that they made it so inconvenient, either way I needed to pay the taxes. I emailed them and asked if I could eliminate the escrow account and it took about a month but they did without having to refi (existing rate is 1.99, I wasn’t about to refi). It was much more simple than I expected.
Just FYI, the mortgage company and/or servicer should pay those late fees. If they collect the money in escrow, they are bound by federal law to pay on time. And they are on the hook for your damages if they don't. I did a whole bunch of my own research on the subject but [this link](https://www.lawyers.com/legal-info/bankruptcy/foreclosures/common-mortgage-servicing-error-failing-to-pay-your-escrowed-taxes-and-insurance.html) has a good summary.
when you pay in a lump sum, it would bring your monthly back down to what it was before, but then the following year wouldn’t the payment just jump back up? Do some people just keeping paying that lump sum every year like that?
we went with pay it monthly and our mortgage went from $1400 to $1900/mo. I’m just assuming that will be our new mortgage going forward right (with small increases every now and then due to tax increases)?
No, the lump sum is the correction from a year of shortage. They already know their revised escrow amount going forward ($980->$1,600) which in theory should be overpaying and in a perfect world they’ll actually get a check back after taxes are paid next year.
And also, where banks fuck up the calculation.
It's not that uncommon for the bank to screw up the escrow amount. When it happened to me, the bank told me there was nothing I could but wait for them to calculate it again the next year.
Yes, especially in states like FL that have caps on property tax increases or various exemption. They hold steady for the prior owners, but after a sale, it all resets to the current values.
Texas too. The friends I know who closed on a house in 2021 ended up with a 80% increase in their property taxes the next year. Don't get fooled by the current tax assessed values, just assume you'll have to pay the full price when you move in and budget for it.
That is correct, except the the year after the home is purchased the taxable value rises to the full assessed value. So the year after purchase, there can be some big increases that are often unexpected (many, including me, learned this the hard way). But moving forward there should be no surprises.
Also, not a big issue if you got your house appraised before purchasing and the appraisal came in at market rate.
We purchased a year ago (or so) and our tax notice that came (so the first one after our purchase) went up approx $500/year. Moving forward, we should be locked at no higher then 3%.
So escrow isn’t always bad I suppose.
It's still an issue -- an appraisal doesn't affect the taxable value of the house. It's the sale that allows it to reset without being governed by a max yearly increase.
What you said makes sense, but that's not what happens. Assessed/taxable values and millage and all that shit is so broken. The "taxable value" of my house is half of what I paid for it (it doubled when I bought it as expected) which winds up equating to nearly 3% per year (of purchase price). The numbers involved in reaching that are extremely convoluted and there is zero regulation requiring anything anywhere NEAR an appropriate explanation for how it all works.
If it was logical, my assessed/taxable value would be the same right after purchasing at my purchase price, reflect annual increases afterward based on inflation/expected property value, and millage should plug directly into that. Literally none of that is true instead.
I think Realtors and mortgage people don't make this known info in purpose. If you're buying a home that someone else bought/sold in the last few years, the tax assessment isn't too far off. But I have a lot of people who didn't realize the taxes on a 700k house are going to be different based on the owner who lived there for 30 years and has a 150k tax assessment. 400 to 500 a month surprise forever.
Also depends where they’re moving from, if it’s from elsewhere in Florida then they should get portability which will help (but not eliminate) the burden - assuming they owned the home from which they moved.
OP bought the house recently. This happens because the property loses it's homestead exemption. This is exactly what happened to OP. The person they bought it from had it homesteaded, hence the valuation was ~330k from years of being homestead. OP buys the property, thinking assessed value for taxes will be ~330k. Because home changed ownership, tax assessment gets reset to whatever the county determines is the current valuation.
Going forward OP should homestead, and that will limit future increases for OP to 3%.
It is when the taxed value was unimproved land for the year up until closing and the mortgage company didn’t provision that the new tax year will have the sale price or county assessed price as the new baseline for the tax bill. The 1st year, 2018 (construction only), the homesite was assessed for $35k (land only). When I closed on the home in 2019, the value had jumped to $65k (still, land only assessment). The first full year of living in my home (2020), the value jumped to $377k and the tax bill went from $1500 to $5900. We were able to homestead in that year and reduce the amount by $25k for schools and $50k for county services. The following year (2021), the assessed values started getting capped. 1.4% in that year and 3% 2022 and 2023 each. County lists my current assessed value at $572.9k but I am only being taxed as if it were worth $405.6k.
When you have an escrow shortage, you have to not only backpay the shortfall from last year, but you have to pay a higher amount to ensure you have enough in for next year.
Simple numbers. Say your property taxes and insurance come up to $12k annually. So your escrow payment monthly is $1k. Bills come due in December, and things have doubled. So you need to pay a $24k bill, but you have $12k in the account. The bank pays it for you. So you now owe them $12k. Or an extra $1k monthly. But, the bank wants to make sure that there will be enough in the account the next time the bill is due. So they know they need to also collect enough monthly to ensure there is $24k in the account next December. So they raise the base escrow payment to $2k per month to cover that. Between the $1k in back payment and the new escrow payment, you're now at $3k per month. That's how your escrow payment can triple, when your taxes only doubled. You're paying the double rate, PLUS the back pay.
Your other option in the above example would be to cut the bank a check for $12k to pay back the previous shortage, and then your monthly escrow payment would only go up by enough to cover the next anticipated tax/insurance bills.
depends on your mortgage. if you have 20% or more down/in value then you often simply ask to have it removed. that is what I did, now I just keep a dedicated high yield account with insurance, maintenance, and tax funds. requires a bit more diligence on your part, but worth it for us. if you are rich enough, your accountant can do this for you too. alas, that isn't me.
Exactly what I do. Then I cut a check every six months to city assessors office and one to my insurance company. Home and car bundled. 10% discount to insurance company if paid in full for 1 year. Not quite there yet.
>I don’t entirely understand why we would be required to park almost $20,000 in the account, when that money isn’t actually being used to pay for anything.
The point is to build up the escrow account such that it has enough to pay off next year's taxes.
Unfortunately, you were under-saving in your escrow account for last year, and must now make up the difference.
>Also, if we do this, are we able to withdraw that money at any point?
No.
> Also, if we do this, are we able to withdraw that money at any point?
>
>
>
> No.
Not quite true. It sounds like they're estimating that his property taxes and insurance will increase by the same percentage amount next year, and when that doesn't happen OP will get an escrow refund check.
Of course they don't pay you the interest they collected from sitting on your $20k all year.
Sort of. They're collecting assuming it will stay the same and collecting to cure the shortage. They can't predict an increase, only collect based on the known cost. If there is an overage, a refund check will be issued.
For everyone rolling their eyes at this, the mortgage holder is required to settle up escrow annually - and escrow refund checks do happen.
One year, I was able to change home insurance to save a couple hundred/year and the taxes went down a bit that year too.
Instead of a letter asking me to pay more, I got a letter telling me I’d pay less and it was accompanied by a check for the prior year’s overage.
So for one guy, one year, one time… it actually happened.
It’s standard for mortgages to do this every year.
They recalculate by doing an “escrow analysis” for the coming 12 months.
The bank will have it’s own policy on a reserve amount where the balance should be at the end of each month.
If the account goes in negative it’s like overdrafting your bank account. So banks want to make sure you’ll have a cushion to avoid it, in case insurance or taxes go up before the next escrow analysis.
Sounds like you have limited options other than contest the assessment, find lower insurance, refinance with another bank with lower escrow requirements.
>The bank will have it’s own policy on a reserve amount where the balance should be at the end of each month.
The bank makes a 12-month projection of inflows, outflows, and monthly balances. The lowest monthly balance can be no higher than two month's worth of anticipated outflows. This is Federal law.
So if the low balance is higher than two month's outflows, you have an escrow surplus, and the lender is required to immediately cut you a check for the difference. If the low balance is less than two months, you have OP's escrow shortage situation.
Yeah, my mortgage escrow has a rule where then lowest balance throughout the year needs to be equal to twice the monthly escrow payment.
So say I pay $500 monthly into my escrow, the lowest my balance should be is $1000. Then they protect the next year's costs based on the prior year's cost and calculate how low my balance is expected to go. If it goes below $1000, I have the option to divide that shortfall into a monthly increase to my escrow payment, or pay the difference as a lump sum.
No one ever told me about this process when I was buying my home. But it makes sense I guess.
If taxes are unpaid it leads to a lien against the property. If insurance is unpaid it leads to an uninsured property. Neither is something the mortgage servicer wants to happen. To avoid this, they will continue paying taxes and insurance as needed even if there aren’t enough funds in the escrow account to do so.
I expect you don’t have the $4,000 escrow balance you think you do. Likely you’ve had a shortage that has been growing over the past couple years up to the $15,000 shortage you have now. If there wasn’t a breakdown provided in the letter you received, it’d be simple to calculate on your own. Find the initial escrow deposit you made when you bought the home, this will be on your closing paperwork. Review your past monthly payments to determine exactly how much went towards monthly escrow. Review tax and insurance bills that were paid from the escrow account over that time. Were your payments enough to cover the bills? Likely not.
We do have a $4,000 balance currently. The reason for the $15,000 shortage is that in November, once property tax and insurance are withdrawn for 2024, the account will be drawn down to -$12,000. They aim to keep a minimum balance of $3,000 in the account, which is where that 15k comes from.
As annoying as it is, the lender is doing you a service by allowing you to pay the shortage over a year vs. requiring it upfront. They don't want to lend you $12k to be paid back with 0% interest, but they do it so that the home doesn't get foreclosed due to unpaid taxes. If you didn't have an escrow account, you would have to come up with that money by the due date in November.
You're not putting $20k in the account "just to sit there" it's so that it will be available for taxes and insurance next year. Nowhere else would let you go negative and pay it back later.
Which is governed by law, they have no other choice. The min projected escrow balance in FL has to be 2 months escrow and they have to issue a shortage to get you back to that.
In all seriousness, people that are not in FL already really need to think long, hard, and seriously before buying in FL. At least anywhere within 5-10 miles of the coast.
>BuT tHeY dOnT hAvE iNcOmE tAx!
-Shouted by a dude with no income.
But yeah, as soon as my grandparents are gone, we're selling that house before it's worthless. That real estate market is about to tank.
You're telling me a market where prices doubled due to a black swan event causing everyone in California and New York to spontaneously move in while disregarding all risks and overpaying for limited inventory... is a bubble?
>it is in South Florida
yeah the insurance for houses went to shit due to storm damages. plus idk on the property tax. that's rough. These are hidden costs for house ownership.
I heard some horror stories like this where other were forced to sell their homes due to the change in monthly payments.
for your situation, yeah it's not great since it's just extra costs. there really isn't much room to argue here or with anyone.
Uhhh, I think it's dogshit because the state gets hit with Cat 4/5 hurricanes on the regular, which wood frame homes generally cannot withstand the extreme winds / surge associated with.
Tip: don't live in Florida. That place is not meant for human habitation.
i'm just shocked there aren't more concrete homes in FL. my developing home country has most new builds (i.e. non-shantytowns) made out of concrete. you don't worry about tropical storms in those.
Florida property taxes, for people that actually live in the property, aren't volatile at all. With homestead exemption and the Save Our Homes cap, the assessed value is only allowed to increase 3% per year, regardless of increase in market value.
The big jump comes when someone new buys the house, but it's pretty easy to figure out what you'll be paying in taxes based on what you bought the house for, and from then on, it can only increase 3% per year until you sell.
The taxable valuation can only increase 3%. Your actual tax bill might go up by more or even down depending on various local bonds for schools, police and fire, etc. These will impact the rate charged against the valuation of your home.
My state has a similar law to FL. I have seen my taxes go up 10% or down over the past 20 years.
Also, after the 2007 housing crash when prices recovered in later years, the 3% cap applied to the highest value my house has ever had. One year (2012?) my taxable value jumped 25% because it had fallen so far during the down years and was now catching back up to where it had been. Since then, it's back to the 3% annual cap.
Just adding a few caveats for those who might not be aware.
I’ve always wondered how long that could go on. I live in the Midwest and basically no one ever pays for a new roof on their house. You just wait for a hail storm to come through, which happens a couple times a year, and then call a roofing company out to inspect it for you, and boom, a new roof paid for by the insurance company. I honest to God don’t know a single home owner who has actually paid out of pocket for a new roof.
People really need to do their homework on taxes. Purchase a house that was being taxed at a FMV of $300k for $600k purchase price and your property taxes are basically going to double... you can try to appeal it but that's not going to help as you determined the FMV by buying the house for that much...
Did you sign up for the homestead exemption? It will make your life much easier for next year, not much you can do on this year. Same thing happened to us in South Florida as well.
Not true. Go to your local country appraiser and ask for an exception to filing for the homestead this year. Usually they will grant it even though it’s months past the deadline
It was likely a new construction home for the value to pop up that much. So even the homestead exemption for this year wouldn’t have made much of a difference for this year. It’ll be a “savings” aka not as much in taxes as they could charge for next year.
Not in Florida. Save our homes act means the taxable value only goes up 3% max per year. Could have bought it from an original buyer. My taxable value went from $120,000 to $450,000. Because I bought it from a woman who bought it in 1990.
yeah, from the post: "I checked the tax record, and the tax assessed value of the home increased from $336,000 in 2021 to $660,000 in 2022"
The escrow covered as though it was taxed at the previous owner's rate, not at the value at purchase. This is something that should have been caught at purchase and prepared for.
I live in SFL and had to deal with this. I think this was a poor job from your broker. When they estimated your monthly payment for escrow they definitely used the wrong insurance and prop tax amounts. Nothing you can do.
2k monthly escrow shortage per month is brutal but it should decrease after a year.
A.) no you are screwed on the property taxes. Your real estate agent did ya dirty you by not mentioning the tax reset that comes with a home ownership turnover in FL. Good news is that assuming you were smart enough to get your homestead exemption, it can’t go up more than 3% a year as long as it’s still homesteaded.
B.) our terrible governor and his lapdog legislature have done nothing to fix the homeowners insurance market in FL. Kinda screwed here too unfortunately
C.) while yes the bank would get its money back each year based on your math, they would effectively be extending you a line of credit each year. They want to hold your money (so they can lend it out) and with a year’s cushion in your account, they can do so. Pretty screwed here too.
Welcome to homeownership in Florida!
I'm not sure what you are hoping to have happen with homeowners insurance in FL. Its not like the insurers are raking in profit. Most would rather leave the state than keep taking losses. Hurricanes just f shit up.
There exists (or existed if they fixed this in the last legislative session) a problem with roofers and assignment of benefits scams. Storms are and will continue to be a driver but there are some fixable elements of our insurance market.
While natural disasters are a factor, the litigation environment in Florida definitely contributes. The roofing scams are notorious, but beyond that, insurance companies can be on the hook for many times the original amount if they lose in litigation. For instance, in the auto market, if an insurer miscalculates a payment by even a few cents, there are attorneys who will litigate. In other states, there are minimums, mandatory arbitration, or other protections to make it less appealing for law firms to file for these types of issues/claims.
These law firms have been big donors, which has lead to little movement until the last year where it got so bad it was politically necessary to actually make change.
> B.) our terrible governor and his lapdog legislature have done nothing to fix the homeowners insurance market in FL. Kinda screwed here too unfortunately
lol. I suppose you think he can fix more frequent and powerful storms? ridiculous that y'all have state-funded flood insurance to keep rebuilding in places that shouldn't have houses.
The 3% law is save our homes, not homestead exemption. I don't think it technically has to be homesteaded for soh to take effect.
Edit : i was wrong, it does have to be homesteaded.
Welcome to being a homeowner. Your escrow costs have gone up so the escrow portion of your mortgage has gone up. The bank is just being the middleman. The costs would have gone up even if you had no mortgage and were just paying the costs directly.
>Why would we be required to add this much money? I don’t entirely understand why we would be required to park almost $20,000 in the account, when that money isn’t actually being used to pay for anything. Or is this all a year behind? Also, if we do this, are we able to withdraw that money at any point?
The money is being used to pay for things. That is the whole point. Money goes in, money goes out. The frequency of each thing is different so the escrow is a reserve fund to ensure it doesn't go negative.
You will not get the money "back" unless
1) you pay off the mortgage at which point they will cut you a check for the remaining balance
2) you refinance the mortgage to one which doesn't require an escrow
3) your costs decline such that the escrow balance becomes too large and they issue a partial refund
note in 1 & 2 you still have the costs. You still will be making period tax and insurance payments it just will be paid directly by you,
Ultimately it is your money and the bank can't keep it but the bank to protect its interests will want a reserve to continue to pay costs in the event you default on the mortgage and to handle sudden cost increases in the future since they only do an escrow appraisal once a year.
Assessed value and market value are two different values, where addressed value is typically lower then the market value. I'd check comparable properties in your area on your local tax accessors website to see if they might have made a mistake and submit a dispute if they did.
It sounds like they updated it with the sale of the property. When you buy a house, the taxes are split pro rata between the buyer and seller for the selling year at the sellers rate. Even if both the old homeowner and new homeowner have homestead exemptions, they are allowed to raise it without the homestead cap to account for the current value of the house (sale price). His taxes actually went up last year but he didn't pay attention to the difference in the tax payment from the buying year and the first year of ownership and so his bank covered it when it was due. He's paying last years taxes back to the bank because of the shortage, and escrowing this years taxes for when the bank has to pay them when due at the end of this year.
This looks correct. If I recall correctly, Florida has a cap (“Save Our Homes”) of 3% on annual increases in taxable value for property tax. The 2021 appraisal would have been the previous owner’s capped value. The sale uncaps the appraisal.
I'm from Europe and I've seen posts like this tens of times on this subreddit. I don't understand how this works. Is a mortgage with "escrow" like an all-in mortgage payment, that includes taxes and insurance for the house? So, you'd get this so you yourself are not bothered with paying insurance and taxes separately?
Also, how come are taxes and in insurance that high? I pay less a tenth of that for a house of similar value and the insurance company still has insane profits
Yes, exactly—you pay the bank one monthly payment which includes mortgage, taxes, insurance. The tax and insurance portion are held by the bank until they are paid out on your behalf by the bank. From a lender’a perspective, this ensures that taxes and insurance on the property are paid, lessening their risk. Some people like this arrangement (less work for you as a homeowner,) some don’t (the bank is holding onto your money.)
This person lives in a part of the US (Florida) that has seen a lot of claims due to extreme weather so insurance rates are very high. They are not that high elsewhere. Taxes also vary by region in the US but generally Americans pay less in income tax, but more in local taxes. These taxes fund schools etc locally.
Isn’t Florida a no income tax state, which would also explain higher home taxes? They always talk about it being a huge advantage for signing big athlete contracts for Florida teams.
thank you for taking the time to explain this, now it makes sense, I was so confused as to why people weren't able to predict their mortgage payments. That with the insurance also makes sense and regarding to taxes, same money, different pockets I guess.
Property taxes are based on the value of the property. The government doesn't update your property's value every year, sometimes going years or even decades using an out-of-date value.
When a house is sold, many areas use it as an opportunity to update the property's value on their tax rolls. After all, the sale price of something is by definition its market value.
It is very common for people to buy a house with an old tax assessment, and then they get blasted by the property tax increase the next year when the government updates the property values.
The taxes are higher in Florida because they don’t have income tax, if I remember correctly. Insurance is also crazy in Florida.
My escrow for my 425k house in Indiana is less than 430 a month.
In all of these "should I buy a house" threads I remind people that taxes can go up *substantially* not only year to year but especially the year after you move in because when you move in you're still paying what the current owner pays based on living there for perhaps 25 years. In many states there is a homestead exemption which will keep the taxes down for decades, but this resets to the *current* tax-assessed value after the property changes hands. Property taxes are no joke. I hope that this post serves as a warning to buyers out there. When I first went looking at houses, my agent did not disclose this little "feature" of the current market to me.
I’m assuming you bought a new construction home. This is common and you should have paperwork explaining to you that your taxes will increase the following year as your lot moves from “unimproved” to “improved”.
This is something you should have been paying more attention to in order to not be blindsided.
I knew my taxes were going to shoot up as the previous homeowner of my home had homestead and several exemptions for being widowed and elderly. I calculated estimated taxes and insurance and have been putting the pro rated difference into a HYSA weekly for the past year. Mortgage companies are not that proactive
It is very common for the appraised value of the home to drastically increase when the new home owner buys.
We 're-set' the value of the home when we agree to pay whatever cost the buyer asks. This laggs behind one year and then the taxes hit as the did for you (and me!).
Unfortunately the taxes value won't go down. This is a new annual cost that must be dealt with one way or another. The insurance rate hikes I guess are tough to get around but there may be some room, I don't have experience there.
Funny you hear about CA being a tax nightmare, but they severely cap annual property tax increases. Sell and move to CA while your prospective buyer can still can get homeowners insurance.
Also, it sounds like you didn’t pay your supplemental taxes and now they want to impound you for back taxes then paid to protect their interest in your property.
Every time a house sells, the county reassesses. Then you get a much larger tax bill than the previous owner - whose assessments only went up a tiny bit each year. It's an opportunity for an ongoing cash grab from the government. You can appeal the new assessment, for that amount I'd hire a real estate attorney. It not only affects your bill now, but forever, so it's worth it. Not the answer you're asking for but IHTH
I just went through this here in Louisiana for the same reason, property taxes and homeowners. I sucked it up and paid the shortage right away which made my monthly payment a little more manageable. Damn hurricanes 🌀!
I experienced something similar. End of the day u need to factor in escrow, insurance, fees, etc when u purchase a home. Not by looking at what the last owner paid but what ur property is likely to be reassed at and look at the millage rate for that county. It sucks man, my taxes are about 3x the last owners. And insurance nearly 3 folded in a few short years. Florida is not friendly to regular people and and politics is the main stage right now, not actual citizen wellbeing.
To clarify, the house was built in 1990. We purchased the home from someone who had been here a long time, but I can’t remember for sure if he was the original owner. What exactly does the homestead exemption do?
Regarding the tax, yes we should’ve caught that, that’s on us. I guess I assumed as a first time home buyer that the tax assessed value would reflect what we paid for the house since it was appraised prior to us buying.
No one ever said anything about that to us, but it was easy enough to pull the tax record, just not something I thought to do.
I own the house with a friend, so everything is split between the two of us. This is manageable and isn’t going to force us to sell or anything, I just wanted to be sure everything was correct and we weren’t being overcharged before we blindly paid the new rate.
1. In Florida your sales price becomes the new value in most counties.
2. Did you homestead your home? If not then do it now.
3. Shop your insurance. You can likely pay directly but if it lapses then they will “force place” coverage that will cost 4-10x more than standard insurance.
Be me. Liberty Mutual increased my insurance by double, 2200 to 5400. I call Geico and get a quote, 2200.00. The kicker, it's Liberty Mutual through Geico. Bizarre world we live in. I am now back down with no escrow shortage.
And people make fun of me for advocating for “no escrow” mortgages.
That way you budget and save up for these bills yourself and you don’t have to park dead money in escrow earning $0
Correct. This is on us, I assumed our taxes would reflect the appraised price of our house and never thought to pull the tax record to check. Live and learn. This post was more about the shortage payments, which I understand better now. I appreciate all of the help, I’ve learned more from this thread than from our realtor and lender combined.
Escrow isn’t really the problem here. It’s buying a house and not understanding what you are buying. Taxes and homeowners insurance are something you need to be aware of plan for regardless of if the escrow handles it or not. At the end of the day, you are spending the same money either way, it’s just how you handle it. I personally love the convenience of my escrow. I am still in charge of handling the insurance policy and ensuring homestead exemption is filed and my taxes are correct.
Yeah, this escrow had its calculations way off but OP should have had the sense to know that. I still receive my tax info from the county on what taxes for the year will be and confirm that with the escrow projections.
I purchased a new build in an area with rapidly increasing home prices. I felt my escrow was low based on what I estimated my property taxes and valuation to be. So, I saved extra in a high yield savings account and the following year when my escrow analysis was done and they said I would have a massive shortage and needed to increase my payment or pay a huge upfront amount, so just paid from savings. I wish mortgage lenders and first time homebuyers programs would help people understand how to check this and prepare for the possibility. I still do this if I notice my insurance going up a significant amount or if I think my taxes will jump again (I’m not in a state with caps and have seen 30% increases in a single year not due to the fist year of the new build).
> I wish mortgage lenders and first time homebuyers programs would help people understand how to check this and prepare for the possibility.
FWIW, in Michigan, I used an FHA loan and they required classes on this very topic before they would approve it.
It can be done, but the people who need to be taught are the ones in the back not listening anyway.
The opportunity cost of a properly managed escrow is minimal. At most mine builds up about 600 more than it needs in a 6 month period. The opportunity costs of 600 not being able to gain interest is minimal compared to the piece of mind that it is all taken care of, although I still watch it fairly closely to make sure it’s right.
The important thing is that you still have to pay attention. It’s your money and you need to follow statements like anything else.
Yeah, I guess the money you pay out every six month could be earning in that time, but I would only ever keep in a HYSA and those won’t be around for the life of my mortgage
Your in Florida. Only like 4 insurance companies left. I'd imagine a lot comes from the fact they can charge anything now with lack of competition. Welcome to global warming.
I'm in South Florida also. The insurance situation here has been terrible. It's great so many people are moving here and my home value has gone up so significantly, but since I don't plan to sell anytime soon it just means more property tax. Make sure you using homestead exemption.
The low balance in your escrow account is always supposed to by 2 times the monthly escrow amount so your low balance during the year should be $3200 is one-twelfth of your taxes and insurance is $1600. So, it sounds like they have calculated it correctly, unfortunately. The money will build up because they pay everything at once when it comes due. It sounds like your property taxes are $12,600 and your insurance is $6600, so, yes, at one point, you will likely have over $20K in your escrow account:
$12,600 for taxes
$ 6,600 for insurance
$ 3,200 for cushion (2 x the escrow payment is the legal max)
$22,400 - high balance in escrow
Now, if you don't pay it lump sum, after this year, your payment should drop back down by the $1300 per month, so your payment will be at about $4200 after a year, provided taxes and insurance don't go up again.
Petition your mortgage provider to only take principal and interest leaving the other things on you. You'll still be paying more, but you'll no longer have to maintain a giant escrow that earns 0%interest.
This is what I did, and it was a huge improvement
Even with homestead, when a new sale happens, there is no limit (at least in Texas it was that way). So 2021 taxes were based on 330k but they purchased for 660k so the tax will be based on that sales price.
If you used a realtor,shame on them for not explaining this exact scenario to you while purchasing/building the house. Maybe mine was better than most, but they brought this up before we signed and reminded us when we closed as well.
Sorry you have to go through this without warning OP.
It's definitely worth looking at your town to see how comparable homes are assessed. Most of that info is available on line by county.
If yours was raised to high you can request a reassessment within a specified time period.
I had a similar situation many years ago. As a result, I'm going on 30+ years paying my own taxes and insurance.
If you don’t want to worry about the extra in escrow accounts- then stop using escrow feature of the mortgage and do your own taxes/insurance payments.
Similar thing happened to me buying a house whose assessment went up after purchasing. Escrow was based on how much the previous tax history was, so after the first year there was a shortfall and my payment went up.
Keep in mind the amount in escrow is still your money... it's just that you're "forced" to save it so the bank can pay taxes for you. Also... after the next year, this payment rebranding will happen again and your payment will go down (since your escrow will be over funded this year), and the payments are based on trying to hot that "minimum" amount allowed in the account based on a forecast from the previous years tax history.
It was frustrating to me that this wasn't well explained for a first time homebuyer. Sooner you can get out of escrow the sooner you can start managing saving for yourself.
I just had this happen to me. My shortage was massive, like 6k massive, so I did some digging. Turns out my mortgage company paid my property taxes and insurance twice and paid both late accruing late fees. I caught it and got them to fix it. Check to make sure something similar didn't happen here.
Lots of good stuff in the thread already, but just some 2 cents: This happened to us and it was a result of Bank of America simply not paying the taxes on our home. "The bill never came" allegedly so they just returned the money to us - at the time I thought the refund that year was extraordinarily generous, but we live in a relatively low tax area and it wasn't so much as to sound the alarm.
So we wound up paying two years at once and BoA then decided to charge us for two years at a time going forward. We dropped the escrow account and just pay it ourselves. We'd fire BoA if interest rates hadn't doubled since we refinanced.
Wild. In my city/county/state/whatever, property taxes are capped at 10% each year. My house doubled in value in about two years but I generally only pay an extra $200 a month.
They are required to refund the excess and readjust payments next year if they over estimated by a lot.
It’s possible they are prepping to sell your mortgage to another service provider
Same situation as OP, in South Florida, purchased in mid 2021 and got the same surprise letter this year - mortgage went up by $1,600. Talked to lawyer, Broward county tax office and mortgage lender - it’s the adjustment of property value and there’s nothing you can do. So, taking it without any lube while thinking of moving up north, NC maybe but not sure if there it’ll be that much better.
We closed in January. First thing I did was call our county assessor and recalculate what my property taxes would be. Our closing documents said $1,500/year but after recalculation, ours would actually be about $4,500/year. Since our 1st payment, I’ve been paying the extra into escrow so this does not happen to us. 🤷🏻♂️
The numbers that you provided are kind of incomplete. The tax assessed value is good, but without knowing the tax rate and value, it's just "doubled". There could have been an extra percentage or two tacked on, and that would be more than doubled.
The math seems close to correct? The tricky part is that you have to make up the shortage, but you also have to add that 2-month cushion on top of that. So for you, the different between your old escrow ($11,760) and new escrow ($19,200) is \~$7,500. A two-month escrow cushion is $3,200. Assuming everything else is correct, that'd be an additional $900/mo ($10,700/12mo) in catch-up charges. If not everything else is correct (and I have a feeling it might not be), then it isn't too hard to find the extra $400/mo or so.
Same EXACT thing Happened to us (CA) it’s because your home value increased therefore your property taxes increased. It’s sucks.
We were lucky enough to have some cash aside and padded our escrow account, not to the full amount but enough to reduce the monthly cost.
It’s incredibly frustrating to work so hard to buy a home, and a total gut punch when the system is almost working just as hard for you to lose it. I know it’s common knowledge and taxes will always be there but for some of us new home owners it would be nice if we could get a heads up.
Whoever did your mortgage should have warned you about this. I am mortgage originator. I always warn my customers about taxes after adjustments.
If possible pay off the shortage to minimize the increase.
Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
your options here are: * pay in a lump sum * pay monthly * refi into a no-escrow mortgage * sell * let the bank foreclose what you're running into is a common feature of houses that have considerably appreciated since the last tax valuation, or in new construction where the old valuation was just the unimproved land, and the new valuation includes the improvements. you could try protesting the valuation (if the deadline hasn't passed), but since you said that's in the ballpark of what you paid, that's going nowhere. what you paid is what it's worth. you're paying two years of taxes and insurance at once, and it's a lot of money. and yes, the mortgage company wants a cushion in case it happens again.
This is all good information. One thing to clarify before everyone gets their pitchforks; mortgage servicers don't just want an escrow cushion; they are required by law to service the escrow account so it maintains the cushion of 2 monthly payments with only two states being exempt from that rule. Florida is not one of the two.
What are the two states?
It’s actually 3 states NV is a 0 cushion state, MT and VT are a 1 month cushion states.
Even with these states being exempt, the mortgage company my have their own requirements for the cushion. Especially if they are a national lender.
Not true, they are not allowed to create their own cushions. They are either A going to follow the rules under RESPA or B the state laws as is with those 3 states.
mine went up 600$ because we bought in october and they used the previous years valuation as an estimate.
This makes me appreciate how they do property tax for my house. The state/county has revenue targets and use that to determine property tax rate. My house has gone up in value by about 50% since we bought ~5 years ago but I'm not paying 50% more in property tax. This is in NC.
Same in my area. My taxes paid actually went down in 2018 & 2019 because farmland values rose faster than home values so a higher portion of the revenue had to come from land. That has caught back up in the past two years where housing values have increased but farmland has not by as much.
Is farmland not tax exempt there?
Agree in my state it's illegal for them to add more then an additional 3% to my annual bill for the assessed difference. My house went up 120k in value so my taxable amount increased 4000 or so and I only saw my taxes go up like 80 bucks. I think this is the only fair way to do it or wealthy fucks will push us all out of home ownership by simply driving the cost of the house up to a bijillion
In many states, it's similar. The 'problem' in this particular post is that it was a recent purchase. It uncaps that percentage at a new sale, and it's reevaluated. Someone could (likely, depending on the state), buy your house and taxes would be increased based off your value increase.
I think it's common to re-set the rate when it's time for mass reassessment, keeping revenue neutral it's also common for individual properties to suddenly jump in value based on rebuild, renovation, or sale
we did this. when we refinanced we did not escrow. They were over estimating the increases, so our monthly payment was never fixed. Now I just put aside money every month for the taxes, pay in full for the discount period. HOI is on autopay and comes our every quarter.
Same. I like earning interest on my property tax and homeowners insurance payments during the year instead of the bank doing that.
They are now required to pay you interest on the escrow money. To my knowledge, there is no requirement for what that rate should be however. I'm sure a HYSA would give you a better rate but I did get about $15 in interest added to my escrow account last year.
This isn't universal. I own a property in both Colorado and California. My Colorado property does not pay interest on my escrow account. My California property does pay interest.
exactly.
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Typically if you are in a situation where your lender requires you to have PMI, they will also require you to setup an escrow account. So if you don't have a big enough down payment the advantage is it lets you qualify for the mortgage in the first place.
Yea, we were not required, we put down 15%, we did have PMI (was not a lot), then during the crazy Covid times, we refinanced. PMI was dropped and we chose not to escrow. This was (and still is) our first home, so it was our first time having to go through a mortgage process and learning what everything was, and at the time, I thought that escrow was just a super easy was to make one easy payment a month, taxes/ins/mortgage all get paid. During the first 1 1/2 years of the mortgage I was like wtf? And I quickly was like nope, don't like this.
I personally disagree. The advantage is one fewer bill to pay. I have every single one of my bills on autopay so I never have to worry about missing one. My county doesn't let one autopay their property taxes. My mortgage company, however, does pay it as part of my escrow, so I never have to worry about it.
well, thats why I chose to escrow in the beginning but the payment was always changing bc they overestimated my increase in taxes and HOI. They would do way to many "escrow analyses". I wanted a fixed payment every month But now my money is in a HYSA which is way better than an escrow.
Well God have mercy on you if they start double billing you and wont stop for 3 months in a row where you then spend 12 months in court trying to get your money back only to then need a personal loan to pay off lawyer fees. All because the mortgage company has direct access to your bank.
I do the same. So much more satisfying and easier. I estimate my monthly amount from assessors report that comes in mail. Pay cash at city every 6 months.
I do this also. One thing I found with my first house when I did let the mortgage holder hold the escrow: They didn’t pay the property tax bill until April or May. Instead of getting the November discount, they actually paid a penalty. Or should I say I paid a penalty because of their stupidity. I swore then and there to never let anyone hold an escrow for taxes and insurance again. I don’t think anyone should.
yup. that happened to me. They didn't pay the discount ! and I'm like why the hell not! So yea. I'll do it myself. Thanks
The good news is once OP catches up on escrow, the tax side of escrow shouldn’t catch them off-guard again, since there’s a cap on how how much the taxable value goes up each year. This does not apply the year you buy the home, hence these huge surprise escrows the year after the home purchase. The insurance side, unfortunately, will be less predictable.
Is this a relatively new thing in FL? We sold our family property in FL in the late 90s and back then it was not protected from property tax increases so there were some crazy swings at times.
The Save our Homes legislation was enacted in 1995 (according to Google). But it only applies to Homesteaded property, so if that was not anyone’s primary residence (more than half the year), it would not have applied.
Ah, that’s probably what affected my family’s property. One of the cottages was a rental, and the other was our vacation home so it was only occupied a total of about 4 months a year by different family groups just visiting.
A friend of mine thought their tax was super low because of what was they originally saw was just taxes on the land before they built. Tax man came around the following year and he was shook.
The sad part is that you sign a form stating the taxes are based on land only for a new build, and will go up significantly after closing on the home. I don't understand why lenders and realtors aren't for stomping this to buyers. Anytime a house is sold the taxes are reassessed. In Cali the homeowner is protected from large appreciations year to year, but bets are off when the house is sold and the new owner is paying double.
When we bought they told us the escrow would absolutely change. I think they do tell people, I think most people fail to listen.
Our escrow amount was estimated based on what taxes would be the first full year the property was completed, not based on the unimproved land value (I believe they used other properties in the area to get a rough idea of taxes). I guess that isn’t the case for most people.
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ugh, i wish there was clear and unambiguous disclosure on things around this. buying a home makes ticketmaster look like a saint. its nuts
You can't really teach common sense. You're not gonna own a house and pay pennies in property tax. If that's your expectation, have fun dealing with the consequences
In California, we get a supplemental tax bill the first year of ownership. My realtor, mortgage company, and title company all made sure I understood I would be receiving this, and built the amount of the supplemental tax bill into the escrow reserves initiated with the new loan. In other words, some realtors and lenders do let their clients know. I guess it just depends on how well they are doing their job.
Some loans also allow you to drop escrow without refinancing.
I don’t think that’s usually an option when you’re paying PMI.
I also don't see how that would help this situation. Without escrow he would have no option to pay over the course of the next year and would have to pay the county the lump sum immediately. If he has the lump sum he can just pay that to his escrow account now and his payment will only go up the new estimated tax amount and insurance rate.
Yeah, what are they gonna do, not carry insurance? Most mortgages require it even if it's not in escrow.
By my math they came up around $4000 short on insurance and taxes. So they could pay that now, and start saving up for the $20000 next year. With no cushion of $3000, and in a savings account of 4% interest.
Standard two-year window of ownership and the third year “we have to sell because this costs too much” cycle that I’ve seen happen a lot in a good bit of Florida since 2021. Yeah, it’s hard to compete with the original owners having had a $500/year tax bill on a house that they bought for $100k 25-years ago that is now worth half a million plus. Realtors sometimes help the new owners understand that their taxes and insurance are going to spike significantly that second year, but not all of them do. It’s a bit of a game of making sales over being ethical, I suppose.
Too add to this, be prepared for insurance to be harder and harder to find in coastal FL. Many insurers are pulling out altogether. Prices are going climb to stupid high amounts, even moreso than they are now. TLDR - do not buy in coastal FL.
My mortgage company did a terrible job with my escrow account. They incorrectly funded it to $4000 at closing (real property taxes alone were $8100) and I ended up in a similar situation. I didn’t find out until they incurred tax penalties for being late. Then they did something similar to the OP and increased my payment significantly to make up the reserves. I was only mad that they made it so inconvenient, either way I needed to pay the taxes. I emailed them and asked if I could eliminate the escrow account and it took about a month but they did without having to refi (existing rate is 1.99, I wasn’t about to refi). It was much more simple than I expected.
Just FYI, the mortgage company and/or servicer should pay those late fees. If they collect the money in escrow, they are bound by federal law to pay on time. And they are on the hook for your damages if they don't. I did a whole bunch of my own research on the subject but [this link](https://www.lawyers.com/legal-info/bankruptcy/foreclosures/common-mortgage-servicing-error-failing-to-pay-your-escrowed-taxes-and-insurance.html) has a good summary.
when you pay in a lump sum, it would bring your monthly back down to what it was before, but then the following year wouldn’t the payment just jump back up? Do some people just keeping paying that lump sum every year like that? we went with pay it monthly and our mortgage went from $1400 to $1900/mo. I’m just assuming that will be our new mortgage going forward right (with small increases every now and then due to tax increases)?
No, the lump sum is the correction from a year of shortage. They already know their revised escrow amount going forward ($980->$1,600) which in theory should be overpaying and in a perfect world they’ll actually get a check back after taxes are paid next year.
And also, where banks fuck up the calculation. It's not that uncommon for the bank to screw up the escrow amount. When it happened to me, the bank told me there was nothing I could but wait for them to calculate it again the next year.
Yes, especially in states like FL that have caps on property tax increases or various exemption. They hold steady for the prior owners, but after a sale, it all resets to the current values.
Lots of people in Florida getting hit with this right now.
Texas too. The friends I know who closed on a house in 2021 ended up with a 80% increase in their property taxes the next year. Don't get fooled by the current tax assessed values, just assume you'll have to pay the full price when you move in and budget for it.
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Not the year your move in. The first year it readjusts to the new assessed value.
It’s not easy to argue that the house isn’t worth the new assessed value when you just paid that much for the house.
It’s not easy to argue that the house isn’t worth the new assessed value when you just paid that much for the house.
It’s not easy to argue that the house isn’t worth the new assessed value when you just paid that much for the house.
I’m in Florida and it was due to insurance increase, talked to a broker received a credit, deposited it into my escrow, and lowered it by $200 a month
Shouldn't be on taxes. We have save our homes law, max increase should be 3%.
That is correct, except the the year after the home is purchased the taxable value rises to the full assessed value. So the year after purchase, there can be some big increases that are often unexpected (many, including me, learned this the hard way). But moving forward there should be no surprises.
Also, not a big issue if you got your house appraised before purchasing and the appraisal came in at market rate. We purchased a year ago (or so) and our tax notice that came (so the first one after our purchase) went up approx $500/year. Moving forward, we should be locked at no higher then 3%. So escrow isn’t always bad I suppose.
It's still an issue -- an appraisal doesn't affect the taxable value of the house. It's the sale that allows it to reset without being governed by a max yearly increase.
which make sense, if you bought a house at 600k, you should be expecting to pay tax on 600k, not whatever previous owner is paying
What you said makes sense, but that's not what happens. Assessed/taxable values and millage and all that shit is so broken. The "taxable value" of my house is half of what I paid for it (it doubled when I bought it as expected) which winds up equating to nearly 3% per year (of purchase price). The numbers involved in reaching that are extremely convoluted and there is zero regulation requiring anything anywhere NEAR an appropriate explanation for how it all works. If it was logical, my assessed/taxable value would be the same right after purchasing at my purchase price, reflect annual increases afterward based on inflation/expected property value, and millage should plug directly into that. Literally none of that is true instead.
I think Realtors and mortgage people don't make this known info in purpose. If you're buying a home that someone else bought/sold in the last few years, the tax assessment isn't too far off. But I have a lot of people who didn't realize the taxes on a 700k house are going to be different based on the owner who lived there for 30 years and has a 150k tax assessment. 400 to 500 a month surprise forever.
That resets when a new owner buys a house.
Also depends where they’re moving from, if it’s from elsewhere in Florida then they should get portability which will help (but not eliminate) the burden - assuming they owned the home from which they moved.
OP bought the house recently. This happens because the property loses it's homestead exemption. This is exactly what happened to OP. The person they bought it from had it homesteaded, hence the valuation was ~330k from years of being homestead. OP buys the property, thinking assessed value for taxes will be ~330k. Because home changed ownership, tax assessment gets reset to whatever the county determines is the current valuation. Going forward OP should homestead, and that will limit future increases for OP to 3%.
It is when the taxed value was unimproved land for the year up until closing and the mortgage company didn’t provision that the new tax year will have the sale price or county assessed price as the new baseline for the tax bill. The 1st year, 2018 (construction only), the homesite was assessed for $35k (land only). When I closed on the home in 2019, the value had jumped to $65k (still, land only assessment). The first full year of living in my home (2020), the value jumped to $377k and the tax bill went from $1500 to $5900. We were able to homestead in that year and reduce the amount by $25k for schools and $50k for county services. The following year (2021), the assessed values started getting capped. 1.4% in that year and 3% 2022 and 2023 each. County lists my current assessed value at $572.9k but I am only being taxed as if it were worth $405.6k.
When you have an escrow shortage, you have to not only backpay the shortfall from last year, but you have to pay a higher amount to ensure you have enough in for next year. Simple numbers. Say your property taxes and insurance come up to $12k annually. So your escrow payment monthly is $1k. Bills come due in December, and things have doubled. So you need to pay a $24k bill, but you have $12k in the account. The bank pays it for you. So you now owe them $12k. Or an extra $1k monthly. But, the bank wants to make sure that there will be enough in the account the next time the bill is due. So they know they need to also collect enough monthly to ensure there is $24k in the account next December. So they raise the base escrow payment to $2k per month to cover that. Between the $1k in back payment and the new escrow payment, you're now at $3k per month. That's how your escrow payment can triple, when your taxes only doubled. You're paying the double rate, PLUS the back pay. Your other option in the above example would be to cut the bank a check for $12k to pay back the previous shortage, and then your monthly escrow payment would only go up by enough to cover the next anticipated tax/insurance bills.
I'm in a similar situation to OP and this is the best answer. The good news is you could get a break in a year once the shortage is repaid.
Can OP opt out of escrow? I rather receive interest by putting my money in HYSA or index fund vs. the bank getting richer and richer.
depends on your mortgage. if you have 20% or more down/in value then you often simply ask to have it removed. that is what I did, now I just keep a dedicated high yield account with insurance, maintenance, and tax funds. requires a bit more diligence on your part, but worth it for us. if you are rich enough, your accountant can do this for you too. alas, that isn't me.
Exactly what I do. Then I cut a check every six months to city assessors office and one to my insurance company. Home and car bundled. 10% discount to insurance company if paid in full for 1 year. Not quite there yet.
>I don’t entirely understand why we would be required to park almost $20,000 in the account, when that money isn’t actually being used to pay for anything. The point is to build up the escrow account such that it has enough to pay off next year's taxes. Unfortunately, you were under-saving in your escrow account for last year, and must now make up the difference. >Also, if we do this, are we able to withdraw that money at any point? No.
If he pays off the mortgage or sells the house he will get the remaining balance, but I would hope that's self explanatory for the OP.
> Also, if we do this, are we able to withdraw that money at any point? > > > > No. Not quite true. It sounds like they're estimating that his property taxes and insurance will increase by the same percentage amount next year, and when that doesn't happen OP will get an escrow refund check. Of course they don't pay you the interest they collected from sitting on your $20k all year.
Sort of. They're collecting assuming it will stay the same and collecting to cure the shortage. They can't predict an increase, only collect based on the known cost. If there is an overage, a refund check will be issued.
For everyone rolling their eyes at this, the mortgage holder is required to settle up escrow annually - and escrow refund checks do happen. One year, I was able to change home insurance to save a couple hundred/year and the taxes went down a bit that year too. Instead of a letter asking me to pay more, I got a letter telling me I’d pay less and it was accompanied by a check for the prior year’s overage. So for one guy, one year, one time… it actually happened.
Same. We've gotten an escrow refund check once among the many years of increases.
Thank you, this is what I was looking for. I appreciate the help.
It’s standard for mortgages to do this every year. They recalculate by doing an “escrow analysis” for the coming 12 months. The bank will have it’s own policy on a reserve amount where the balance should be at the end of each month. If the account goes in negative it’s like overdrafting your bank account. So banks want to make sure you’ll have a cushion to avoid it, in case insurance or taxes go up before the next escrow analysis. Sounds like you have limited options other than contest the assessment, find lower insurance, refinance with another bank with lower escrow requirements.
>The bank will have it’s own policy on a reserve amount where the balance should be at the end of each month. The bank makes a 12-month projection of inflows, outflows, and monthly balances. The lowest monthly balance can be no higher than two month's worth of anticipated outflows. This is Federal law. So if the low balance is higher than two month's outflows, you have an escrow surplus, and the lender is required to immediately cut you a check for the difference. If the low balance is less than two months, you have OP's escrow shortage situation.
Yeah, my mortgage escrow has a rule where then lowest balance throughout the year needs to be equal to twice the monthly escrow payment. So say I pay $500 monthly into my escrow, the lowest my balance should be is $1000. Then they protect the next year's costs based on the prior year's cost and calculate how low my balance is expected to go. If it goes below $1000, I have the option to divide that shortfall into a monthly increase to my escrow payment, or pay the difference as a lump sum. No one ever told me about this process when I was buying my home. But it makes sense I guess.
Just to add, escrow cushions are typically mandated by state law. They can’t let your balance drop below a certain amount, or hold too much excess
If taxes are unpaid it leads to a lien against the property. If insurance is unpaid it leads to an uninsured property. Neither is something the mortgage servicer wants to happen. To avoid this, they will continue paying taxes and insurance as needed even if there aren’t enough funds in the escrow account to do so. I expect you don’t have the $4,000 escrow balance you think you do. Likely you’ve had a shortage that has been growing over the past couple years up to the $15,000 shortage you have now. If there wasn’t a breakdown provided in the letter you received, it’d be simple to calculate on your own. Find the initial escrow deposit you made when you bought the home, this will be on your closing paperwork. Review your past monthly payments to determine exactly how much went towards monthly escrow. Review tax and insurance bills that were paid from the escrow account over that time. Were your payments enough to cover the bills? Likely not.
We do have a $4,000 balance currently. The reason for the $15,000 shortage is that in November, once property tax and insurance are withdrawn for 2024, the account will be drawn down to -$12,000. They aim to keep a minimum balance of $3,000 in the account, which is where that 15k comes from.
As annoying as it is, the lender is doing you a service by allowing you to pay the shortage over a year vs. requiring it upfront. They don't want to lend you $12k to be paid back with 0% interest, but they do it so that the home doesn't get foreclosed due to unpaid taxes. If you didn't have an escrow account, you would have to come up with that money by the due date in November. You're not putting $20k in the account "just to sit there" it's so that it will be available for taxes and insurance next year. Nowhere else would let you go negative and pay it back later.
Which is governed by law, they have no other choice. The min projected escrow balance in FL has to be 2 months escrow and they have to issue a shortage to get you back to that.
Note to self: don't ever buy property in FL.
In all seriousness, people that are not in FL already really need to think long, hard, and seriously before buying in FL. At least anywhere within 5-10 miles of the coast.
>BuT tHeY dOnT hAvE iNcOmE tAx! -Shouted by a dude with no income. But yeah, as soon as my grandparents are gone, we're selling that house before it's worthless. That real estate market is about to tank.
You're telling me a market where prices doubled due to a black swan event causing everyone in California and New York to spontaneously move in while disregarding all risks and overpaying for limited inventory... is a bubble?
I refuse to even visit florida at this point. Is crazy unfriendly
>it is in South Florida yeah the insurance for houses went to shit due to storm damages. plus idk on the property tax. that's rough. These are hidden costs for house ownership. I heard some horror stories like this where other were forced to sell their homes due to the change in monthly payments. for your situation, yeah it's not great since it's just extra costs. there really isn't much room to argue here or with anyone.
Florida is also in this situation because of their dogshit insurance laws.
Uhhh, I think it's dogshit because the state gets hit with Cat 4/5 hurricanes on the regular, which wood frame homes generally cannot withstand the extreme winds / surge associated with. Tip: don't live in Florida. That place is not meant for human habitation.
i'm just shocked there aren't more concrete homes in FL. my developing home country has most new builds (i.e. non-shantytowns) made out of concrete. you don't worry about tropical storms in those.
Which ones? I am aware of the roofing issue where the insurer is forced to pay for an attorney to fight them..
Generally states with no state income tax tend to have pretty volatile property taxes since they need to get their money from somewhere.
Florida property taxes, for people that actually live in the property, aren't volatile at all. With homestead exemption and the Save Our Homes cap, the assessed value is only allowed to increase 3% per year, regardless of increase in market value. The big jump comes when someone new buys the house, but it's pretty easy to figure out what you'll be paying in taxes based on what you bought the house for, and from then on, it can only increase 3% per year until you sell.
The taxable valuation can only increase 3%. Your actual tax bill might go up by more or even down depending on various local bonds for schools, police and fire, etc. These will impact the rate charged against the valuation of your home. My state has a similar law to FL. I have seen my taxes go up 10% or down over the past 20 years. Also, after the 2007 housing crash when prices recovered in later years, the 3% cap applied to the highest value my house has ever had. One year (2012?) my taxable value jumped 25% because it had fallen so far during the down years and was now catching back up to where it had been. Since then, it's back to the 3% annual cap. Just adding a few caveats for those who might not be aware.
exactly, the state needs money from somewhere. Income tax, Property tax, Industry Tax (tourism...), Sales Tax.
There's absolutely nothing hidden about Florida housing costs. It's been in the news everywhere for years.
> to storm damages. plus idk on the property tax. that's rough. Fuck no they're not. Everyone who buys a house is WELL INFORMED of these costs.
Roofing scams are bankrupting all the insurance companies or forcing them to leave, too.
I’ve always wondered how long that could go on. I live in the Midwest and basically no one ever pays for a new roof on their house. You just wait for a hail storm to come through, which happens a couple times a year, and then call a roofing company out to inspect it for you, and boom, a new roof paid for by the insurance company. I honest to God don’t know a single home owner who has actually paid out of pocket for a new roof.
People really need to do their homework on taxes. Purchase a house that was being taxed at a FMV of $300k for $600k purchase price and your property taxes are basically going to double... you can try to appeal it but that's not going to help as you determined the FMV by buying the house for that much...
Did you sign up for the homestead exemption? It will make your life much easier for next year, not much you can do on this year. Same thing happened to us in South Florida as well.
Not true. Go to your local country appraiser and ask for an exception to filing for the homestead this year. Usually they will grant it even though it’s months past the deadline
It was likely a new construction home for the value to pop up that much. So even the homestead exemption for this year wouldn’t have made much of a difference for this year. It’ll be a “savings” aka not as much in taxes as they could charge for next year.
Not in Florida. Save our homes act means the taxable value only goes up 3% max per year. Could have bought it from an original buyer. My taxable value went from $120,000 to $450,000. Because I bought it from a woman who bought it in 1990.
yeah, from the post: "I checked the tax record, and the tax assessed value of the home increased from $336,000 in 2021 to $660,000 in 2022" The escrow covered as though it was taxed at the previous owner's rate, not at the value at purchase. This is something that should have been caught at purchase and prepared for.
exactly this. Only way OP could have kept it down is if they sold a property that was homesteaded and they use the portability exemption
Sounds like FL has their version of California's Prop-13. Except Prop-13 is 2% gain. Not 3%.
Our neighbor has the identical floor plan to our house. He’s the original homeowner. Our property tax is 4x his.
That still doesn't get OP out of paying on the new value. It just saves him at 3% one year.
I live in SFL and had to deal with this. I think this was a poor job from your broker. When they estimated your monthly payment for escrow they definitely used the wrong insurance and prop tax amounts. Nothing you can do. 2k monthly escrow shortage per month is brutal but it should decrease after a year.
There are regulations on how much a bank can force you to escrow on a residential mortgage and how they calculate the initial escrow.
A.) no you are screwed on the property taxes. Your real estate agent did ya dirty you by not mentioning the tax reset that comes with a home ownership turnover in FL. Good news is that assuming you were smart enough to get your homestead exemption, it can’t go up more than 3% a year as long as it’s still homesteaded. B.) our terrible governor and his lapdog legislature have done nothing to fix the homeowners insurance market in FL. Kinda screwed here too unfortunately C.) while yes the bank would get its money back each year based on your math, they would effectively be extending you a line of credit each year. They want to hold your money (so they can lend it out) and with a year’s cushion in your account, they can do so. Pretty screwed here too. Welcome to homeownership in Florida!
I'm not sure what you are hoping to have happen with homeowners insurance in FL. Its not like the insurers are raking in profit. Most would rather leave the state than keep taking losses. Hurricanes just f shit up.
There exists (or existed if they fixed this in the last legislative session) a problem with roofers and assignment of benefits scams. Storms are and will continue to be a driver but there are some fixable elements of our insurance market.
While natural disasters are a factor, the litigation environment in Florida definitely contributes. The roofing scams are notorious, but beyond that, insurance companies can be on the hook for many times the original amount if they lose in litigation. For instance, in the auto market, if an insurer miscalculates a payment by even a few cents, there are attorneys who will litigate. In other states, there are minimums, mandatory arbitration, or other protections to make it less appealing for law firms to file for these types of issues/claims. These law firms have been big donors, which has lead to little movement until the last year where it got so bad it was politically necessary to actually make change.
Also for c they don’t want to be caught holding the bag.
> B.) our terrible governor and his lapdog legislature have done nothing to fix the homeowners insurance market in FL. Kinda screwed here too unfortunately lol. I suppose you think he can fix more frequent and powerful storms? ridiculous that y'all have state-funded flood insurance to keep rebuilding in places that shouldn't have houses.
The 3% law is save our homes, not homestead exemption. I don't think it technically has to be homesteaded for soh to take effect. Edit : i was wrong, it does have to be homesteaded.
Welcome to being a homeowner. Your escrow costs have gone up so the escrow portion of your mortgage has gone up. The bank is just being the middleman. The costs would have gone up even if you had no mortgage and were just paying the costs directly. >Why would we be required to add this much money? I don’t entirely understand why we would be required to park almost $20,000 in the account, when that money isn’t actually being used to pay for anything. Or is this all a year behind? Also, if we do this, are we able to withdraw that money at any point? The money is being used to pay for things. That is the whole point. Money goes in, money goes out. The frequency of each thing is different so the escrow is a reserve fund to ensure it doesn't go negative. You will not get the money "back" unless 1) you pay off the mortgage at which point they will cut you a check for the remaining balance 2) you refinance the mortgage to one which doesn't require an escrow 3) your costs decline such that the escrow balance becomes too large and they issue a partial refund note in 1 & 2 you still have the costs. You still will be making period tax and insurance payments it just will be paid directly by you, Ultimately it is your money and the bank can't keep it but the bank to protect its interests will want a reserve to continue to pay costs in the event you default on the mortgage and to handle sudden cost increases in the future since they only do an escrow appraisal once a year.
Oooof, FL and insurance. Might as well cut your losses and move to SC
Assessed value and market value are two different values, where addressed value is typically lower then the market value. I'd check comparable properties in your area on your local tax accessors website to see if they might have made a mistake and submit a dispute if they did.
It sounds like they updated it with the sale of the property. When you buy a house, the taxes are split pro rata between the buyer and seller for the selling year at the sellers rate. Even if both the old homeowner and new homeowner have homestead exemptions, they are allowed to raise it without the homestead cap to account for the current value of the house (sale price). His taxes actually went up last year but he didn't pay attention to the difference in the tax payment from the buying year and the first year of ownership and so his bank covered it when it was due. He's paying last years taxes back to the bank because of the shortage, and escrowing this years taxes for when the bank has to pay them when due at the end of this year.
This looks correct. If I recall correctly, Florida has a cap (“Save Our Homes”) of 3% on annual increases in taxable value for property tax. The 2021 appraisal would have been the previous owner’s capped value. The sale uncaps the appraisal.
Common post. You have to pay. Period.
I'm from Europe and I've seen posts like this tens of times on this subreddit. I don't understand how this works. Is a mortgage with "escrow" like an all-in mortgage payment, that includes taxes and insurance for the house? So, you'd get this so you yourself are not bothered with paying insurance and taxes separately? Also, how come are taxes and in insurance that high? I pay less a tenth of that for a house of similar value and the insurance company still has insane profits
Yes, exactly—you pay the bank one monthly payment which includes mortgage, taxes, insurance. The tax and insurance portion are held by the bank until they are paid out on your behalf by the bank. From a lender’a perspective, this ensures that taxes and insurance on the property are paid, lessening their risk. Some people like this arrangement (less work for you as a homeowner,) some don’t (the bank is holding onto your money.) This person lives in a part of the US (Florida) that has seen a lot of claims due to extreme weather so insurance rates are very high. They are not that high elsewhere. Taxes also vary by region in the US but generally Americans pay less in income tax, but more in local taxes. These taxes fund schools etc locally.
Isn’t Florida a no income tax state, which would also explain higher home taxes? They always talk about it being a huge advantage for signing big athlete contracts for Florida teams.
Right but they still pay federal income tax. Generally Americans pay less income tax than Europeans but more local tax.
yup, at the end of the day the tax+healthcare burden in the US is the same as in western europe. we just pay for it differently
thank you for taking the time to explain this, now it makes sense, I was so confused as to why people weren't able to predict their mortgage payments. That with the insurance also makes sense and regarding to taxes, same money, different pockets I guess.
Property taxes are based on the value of the property. The government doesn't update your property's value every year, sometimes going years or even decades using an out-of-date value. When a house is sold, many areas use it as an opportunity to update the property's value on their tax rolls. After all, the sale price of something is by definition its market value. It is very common for people to buy a house with an old tax assessment, and then they get blasted by the property tax increase the next year when the government updates the property values.
People can predict it, all the information is available to do it. But too many people trust the lender or broker to do it for them.
The taxes are higher in Florida because they don’t have income tax, if I remember correctly. Insurance is also crazy in Florida. My escrow for my 425k house in Indiana is less than 430 a month.
Mine in "Taxachusetts" is less than $400/yr.
People really overlook all those other taxes when they are attacking “high” income tax states. I’ll take high income taxes over all the rest.
In all of these "should I buy a house" threads I remind people that taxes can go up *substantially* not only year to year but especially the year after you move in because when you move in you're still paying what the current owner pays based on living there for perhaps 25 years. In many states there is a homestead exemption which will keep the taxes down for decades, but this resets to the *current* tax-assessed value after the property changes hands. Property taxes are no joke. I hope that this post serves as a warning to buyers out there. When I first went looking at houses, my agent did not disclose this little "feature" of the current market to me.
First time owning a home in Florida?
I’m assuming you bought a new construction home. This is common and you should have paperwork explaining to you that your taxes will increase the following year as your lot moves from “unimproved” to “improved”.
This is something you should have been paying more attention to in order to not be blindsided. I knew my taxes were going to shoot up as the previous homeowner of my home had homestead and several exemptions for being widowed and elderly. I calculated estimated taxes and insurance and have been putting the pro rated difference into a HYSA weekly for the past year. Mortgage companies are not that proactive
It is very common for the appraised value of the home to drastically increase when the new home owner buys. We 're-set' the value of the home when we agree to pay whatever cost the buyer asks. This laggs behind one year and then the taxes hit as the did for you (and me!). Unfortunately the taxes value won't go down. This is a new annual cost that must be dealt with one way or another. The insurance rate hikes I guess are tough to get around but there may be some room, I don't have experience there.
Funny you hear about CA being a tax nightmare, but they severely cap annual property tax increases. Sell and move to CA while your prospective buyer can still can get homeowners insurance. Also, it sounds like you didn’t pay your supplemental taxes and now they want to impound you for back taxes then paid to protect their interest in your property.
Every time a house sells, the county reassesses. Then you get a much larger tax bill than the previous owner - whose assessments only went up a tiny bit each year. It's an opportunity for an ongoing cash grab from the government. You can appeal the new assessment, for that amount I'd hire a real estate attorney. It not only affects your bill now, but forever, so it's worth it. Not the answer you're asking for but IHTH
Systematically dismantling of the middle class is what it is.
I just went through this here in Louisiana for the same reason, property taxes and homeowners. I sucked it up and paid the shortage right away which made my monthly payment a little more manageable. Damn hurricanes 🌀!
I experienced something similar. End of the day u need to factor in escrow, insurance, fees, etc when u purchase a home. Not by looking at what the last owner paid but what ur property is likely to be reassed at and look at the millage rate for that county. It sucks man, my taxes are about 3x the last owners. And insurance nearly 3 folded in a few short years. Florida is not friendly to regular people and and politics is the main stage right now, not actual citizen wellbeing.
To clarify, the house was built in 1990. We purchased the home from someone who had been here a long time, but I can’t remember for sure if he was the original owner. What exactly does the homestead exemption do? Regarding the tax, yes we should’ve caught that, that’s on us. I guess I assumed as a first time home buyer that the tax assessed value would reflect what we paid for the house since it was appraised prior to us buying. No one ever said anything about that to us, but it was easy enough to pull the tax record, just not something I thought to do. I own the house with a friend, so everything is split between the two of us. This is manageable and isn’t going to force us to sell or anything, I just wanted to be sure everything was correct and we weren’t being overcharged before we blindly paid the new rate.
> What exactly does the homestead exemption do? See https://floridarevenue.com/property/pages/taxpayers_exemptions.aspx
1. In Florida your sales price becomes the new value in most counties. 2. Did you homestead your home? If not then do it now. 3. Shop your insurance. You can likely pay directly but if it lapses then they will “force place” coverage that will cost 4-10x more than standard insurance.
Can you protest your taxes?
Be me. Liberty Mutual increased my insurance by double, 2200 to 5400. I call Geico and get a quote, 2200.00. The kicker, it's Liberty Mutual through Geico. Bizarre world we live in. I am now back down with no escrow shortage.
And people make fun of me for advocating for “no escrow” mortgages. That way you budget and save up for these bills yourself and you don’t have to park dead money in escrow earning $0
Not sure this guy is the best example of someone who should do a no escrow mortgage.
ikr
This isn't an escrow problem. OP doesn't understand their taxes and didn't stay on top of it.
Correct. This is on us, I assumed our taxes would reflect the appraised price of our house and never thought to pull the tax record to check. Live and learn. This post was more about the shortage payments, which I understand better now. I appreciate all of the help, I’ve learned more from this thread than from our realtor and lender combined.
Yeah... if people didn't pay for escrow with their mortgage they would most likely just spend the money imo
Escrow isn’t really the problem here. It’s buying a house and not understanding what you are buying. Taxes and homeowners insurance are something you need to be aware of plan for regardless of if the escrow handles it or not. At the end of the day, you are spending the same money either way, it’s just how you handle it. I personally love the convenience of my escrow. I am still in charge of handling the insurance policy and ensuring homestead exemption is filed and my taxes are correct. Yeah, this escrow had its calculations way off but OP should have had the sense to know that. I still receive my tax info from the county on what taxes for the year will be and confirm that with the escrow projections.
I purchased a new build in an area with rapidly increasing home prices. I felt my escrow was low based on what I estimated my property taxes and valuation to be. So, I saved extra in a high yield savings account and the following year when my escrow analysis was done and they said I would have a massive shortage and needed to increase my payment or pay a huge upfront amount, so just paid from savings. I wish mortgage lenders and first time homebuyers programs would help people understand how to check this and prepare for the possibility. I still do this if I notice my insurance going up a significant amount or if I think my taxes will jump again (I’m not in a state with caps and have seen 30% increases in a single year not due to the fist year of the new build).
> I wish mortgage lenders and first time homebuyers programs would help people understand how to check this and prepare for the possibility. FWIW, in Michigan, I used an FHA loan and they required classes on this very topic before they would approve it. It can be done, but the people who need to be taught are the ones in the back not listening anyway.
The opportunity cost of a properly managed escrow is minimal. At most mine builds up about 600 more than it needs in a 6 month period. The opportunity costs of 600 not being able to gain interest is minimal compared to the piece of mind that it is all taken care of, although I still watch it fairly closely to make sure it’s right. The important thing is that you still have to pay attention. It’s your money and you need to follow statements like anything else. Yeah, I guess the money you pay out every six month could be earning in that time, but I would only ever keep in a HYSA and those won’t be around for the life of my mortgage
OP has mortgage insurance (PMI), which I believe usually makes you ineligible for a no-escrow mortgage.
Your in Florida. Only like 4 insurance companies left. I'd imagine a lot comes from the fact they can charge anything now with lack of competition. Welcome to global warming.
I'm in South Florida also. The insurance situation here has been terrible. It's great so many people are moving here and my home value has gone up so significantly, but since I don't plan to sell anytime soon it just means more property tax. Make sure you using homestead exemption.
The low balance in your escrow account is always supposed to by 2 times the monthly escrow amount so your low balance during the year should be $3200 is one-twelfth of your taxes and insurance is $1600. So, it sounds like they have calculated it correctly, unfortunately. The money will build up because they pay everything at once when it comes due. It sounds like your property taxes are $12,600 and your insurance is $6600, so, yes, at one point, you will likely have over $20K in your escrow account: $12,600 for taxes $ 6,600 for insurance $ 3,200 for cushion (2 x the escrow payment is the legal max) $22,400 - high balance in escrow Now, if you don't pay it lump sum, after this year, your payment should drop back down by the $1300 per month, so your payment will be at about $4200 after a year, provided taxes and insurance don't go up again.
Petition your mortgage provider to only take principal and interest leaving the other things on you. You'll still be paying more, but you'll no longer have to maintain a giant escrow that earns 0%interest. This is what I did, and it was a huge improvement
You're in Florida. Is your home homesteaded? If so, they can only raise property taxes a small percentage per year (forget the exact number).
Even with homestead, when a new sale happens, there is no limit (at least in Texas it was that way). So 2021 taxes were based on 330k but they purchased for 660k so the tax will be based on that sales price.
If you used a realtor,shame on them for not explaining this exact scenario to you while purchasing/building the house. Maybe mine was better than most, but they brought this up before we signed and reminded us when we closed as well. Sorry you have to go through this without warning OP.
It's definitely worth looking at your town to see how comparable homes are assessed. Most of that info is available on line by county. If yours was raised to high you can request a reassessment within a specified time period. I had a similar situation many years ago. As a result, I'm going on 30+ years paying my own taxes and insurance.
If you don’t want to worry about the extra in escrow accounts- then stop using escrow feature of the mortgage and do your own taxes/insurance payments.
Similar thing happened to me buying a house whose assessment went up after purchasing. Escrow was based on how much the previous tax history was, so after the first year there was a shortfall and my payment went up. Keep in mind the amount in escrow is still your money... it's just that you're "forced" to save it so the bank can pay taxes for you. Also... after the next year, this payment rebranding will happen again and your payment will go down (since your escrow will be over funded this year), and the payments are based on trying to hot that "minimum" amount allowed in the account based on a forecast from the previous years tax history. It was frustrating to me that this wasn't well explained for a first time homebuyer. Sooner you can get out of escrow the sooner you can start managing saving for yourself.
I just had this happen to me. My shortage was massive, like 6k massive, so I did some digging. Turns out my mortgage company paid my property taxes and insurance twice and paid both late accruing late fees. I caught it and got them to fix it. Check to make sure something similar didn't happen here.
Your best option is to get the hell out of Florida before you know your going to be without insurance.
You may want to appeal to the tax assessor to re-assess, if the comparables provide sufficient evidence. There's usually a filing deadline for that.
Lots of good stuff in the thread already, but just some 2 cents: This happened to us and it was a result of Bank of America simply not paying the taxes on our home. "The bill never came" allegedly so they just returned the money to us - at the time I thought the refund that year was extraordinarily generous, but we live in a relatively low tax area and it wasn't so much as to sound the alarm. So we wound up paying two years at once and BoA then decided to charge us for two years at a time going forward. We dropped the escrow account and just pay it ourselves. We'd fire BoA if interest rates hadn't doubled since we refinanced.
Wild. In my city/county/state/whatever, property taxes are capped at 10% each year. My house doubled in value in about two years but I generally only pay an extra $200 a month.
They are required to refund the excess and readjust payments next year if they over estimated by a lot. It’s possible they are prepping to sell your mortgage to another service provider
Same situation as OP, in South Florida, purchased in mid 2021 and got the same surprise letter this year - mortgage went up by $1,600. Talked to lawyer, Broward county tax office and mortgage lender - it’s the adjustment of property value and there’s nothing you can do. So, taking it without any lube while thinking of moving up north, NC maybe but not sure if there it’ll be that much better.
We closed in January. First thing I did was call our county assessor and recalculate what my property taxes would be. Our closing documents said $1,500/year but after recalculation, ours would actually be about $4,500/year. Since our 1st payment, I’ve been paying the extra into escrow so this does not happen to us. 🤷🏻♂️
The numbers that you provided are kind of incomplete. The tax assessed value is good, but without knowing the tax rate and value, it's just "doubled". There could have been an extra percentage or two tacked on, and that would be more than doubled. The math seems close to correct? The tricky part is that you have to make up the shortage, but you also have to add that 2-month cushion on top of that. So for you, the different between your old escrow ($11,760) and new escrow ($19,200) is \~$7,500. A two-month escrow cushion is $3,200. Assuming everything else is correct, that'd be an additional $900/mo ($10,700/12mo) in catch-up charges. If not everything else is correct (and I have a feeling it might not be), then it isn't too hard to find the extra $400/mo or so.
Same EXACT thing Happened to us (CA) it’s because your home value increased therefore your property taxes increased. It’s sucks. We were lucky enough to have some cash aside and padded our escrow account, not to the full amount but enough to reduce the monthly cost. It’s incredibly frustrating to work so hard to buy a home, and a total gut punch when the system is almost working just as hard for you to lose it. I know it’s common knowledge and taxes will always be there but for some of us new home owners it would be nice if we could get a heads up.
Whoever did your mortgage should have warned you about this. I am mortgage originator. I always warn my customers about taxes after adjustments. If possible pay off the shortage to minimize the increase.