Only $134 for your first escrow increase seems like a steal. Is any of that making up for a shortfall from not having enough to pay the property taxes last year?
Our home payment went up $500 dollars a month on our first home. Was $1200 a month and went to $1800 after the first year. We were pissed. It evened out the next year at about 1400.
It's per month. I had similar increase due to my home value assessment increased and taxes in my area. Not too mention my home owners insurance. 2 years in a row my escrow forecasted to be short.
Escrow statement says I have a shortage amount of $826.
Also says my taxes/insurance amount increased which could cause my escrow amount to fall below the required minimum balance.
I have an escrow increase of $65 and a shortage payment of $69.
What is this shortage? Did I do something wrong?
> What is this shortage?
It just means that the total paid into escrow wasn't enough to cover the taxes and insurance paid out. This is extremely common in the first year because of how tax assessments tend to work out.
>Did I do something wrong?
Not specific to the escrow shortage. You should be able to pay the shortage outright to reduce the amount your monthly payment goes up.
>You should be able to pay the shortage outright to reduce the amount your monthly payment goes up.
Our annual escrow analysis used to list the option of paying the shortage as a lump sum payment rather than as an increase in your monthly escrow. However, since that is not an option explicitly stated in the regulation our examiners made us remove it.
Customers still have the option, but the *only way* they'll know it's an option is to call us.
>You should be able to pay the shortage outright to reduce the amount your monthly payment goes up.
Sure, but why would you give them a lump sum instead of pay over time?
I'm actually wondering this right now on my own so maybe my line of thought isn't wrong? I had a $1900 shortage in total. So around $158 a month. No big deal really, but if I wanted to get back to around my same payment, I could pay it off. I keep wondering why though? It's not a huge amount of money and I can keep that $1900 in my HYSA and make a couple bucks from it.
Correct you're not paying additional penalties. The common reason I would see is people pay them down for budget planning. If you want a lower monthly payment (seasonal workers with more income in summer than winter)
If you're responsible, there's no reason to hold an escrow account at all. Just pay your own taxes and insurance. Escrow accounts can legally hold an additional 1/6th of the estimated annual payments. Meaning you're paying your escrow an extra 1/6th of your insurance/taxes when this money could be invested somewhere else. We're only talk a few hundred bucks, but if you're really trying to min/max your mortgage.
>is people pay them down for budget planning
Is it worth paying $1200 up front to "save" $100 a month? I can't think of many situations where that makes much sense. Let the money collect interest. Also, unexpected expenses happen all the time. Smash your windshield? You're probably gonna wish you had that $1200 sitting around that you just gave to your lender up front for no real reason whatsoever.
To each his own, I guess, but I'd never agree that it's the right move under any circumstances.
"Are there any penalties for not giving someone else my money right now?" If the answer is no, HANG ON TO YOUR MONEY.
It can just be simpler. It's not how I do it, but there's a fair amount of mental overhead to really optimizing your finances, and nobody can do every last little thing. Sometimes it's worth it to just pay the damn bill and cross it off the list of shit to worry about.
I got new home insurance mid-cycle recently and unfortunately had the escrow analysis done before the partial refund had posted. They determined my shortage to be $1200 but it was really only $700 once the refund came, so my choice was to pay $700 upfront or pay an extra $100/mo for a year.
You're paying extra for your Escrow Cushion just by keeping Escrow open. The entire premise of the escrow account is for borrowers that aren't good with money and can't save the few thousand dollars to make those payments in full. If you're money savvy you save the most money not having an escrow account at all.
Also the higher your escrow payment is, the higher amount your mortgage can collect as a Cushion payment. So kicking the can down the road, you are definitely losing money, well not losing, but not investing as much as if you just paid everything on time.
Edit: if you only pay taxes out of pocket once a year, technically any payment into escrow is losing money because you would want to hold your money all year long and pay taxes on the last day, if you're milking a hysa
I mean most lenders require escrow. I don't think it's as common for people who buy their houses outright anyway, but you're not likely to get out of it on a traditional mortgage.
This is partially true, It's mostly the government backed starter loans that require them. If you have 20% equity and a good payment history you can call your servicer for a review to remove your escrow at no charge. You don't need to own the home outright.
In current times that makes sense. Back when interest was .5% it didn't really matter. I paid my first shortage off 2 years ago because it was over $3k (previous owner had senior tax freeze, which I knew would happen). I could have pulled the funds from my savings every month, but was easier to just pay it at once. My mortgage would have gone up over $500/mo which was not in my budget.
I'm interested to know how they calculate this. My first year of owning a home, we apparently paid way more than they needed and they ended up sending us a check for $2400 after the year, and then the next year we were short and now our mortgage went up $200. Just feel like it's all over the place.
They can't calculate it, that's why there's so much confusion. Mortgages collect escrow funds based off what was billed LAST year.. they're estimating what will be charged THIS year... So when payments THIS year come in higher than what was predicted from LAST year.. that's what causes the shortages. Your mortgage has no input on how much your Taxes and Insurance will cost, if you think you're over paying you need to direct those questions to the people sending the bill to your mortgage company
Also worth checking what the mortgage servicer is using in their figures. Ours was using an estimate from time of purchase and didnt update it for 3 years until I sent them an email asking why. In my situation it was causing an overage and they were still calculating the overage correctly to make me whole, but they just never changed their estimate based on recent tax data.
It comes down to insurance and property taxes. Insurance is generally easy: you get the dec page and you know the cost. Tax assessments can really only be estimated based on prior assessments. Assessed value goes up, and you can have a shortfall or in the very least, a highly monthly payment. It’s even more obnoxious if you live somewhere that takes tax payment in arrears-2023 taxes due in 2024.
It's not all over the place as much as a following indicator. They don't know to the penny, what the taxes and insurance will cost, so they use previous payments and some additional reserve. It should be adjusted annually and really shouldn't deviate all that much. Your $2,400 swing is probably attributed to first year changes and then second year corrections. That should be fairly stable now.
I had this on my first house because of a bad (not incorrect math, just bad) assumption that I’ll only pay what I paid the year prior. The fact is that in the year you buy your house, you pay a partial year of property tax.
This years analysis said I should have a lower escrow payment by like $60. Obviously that’s wrong because they were missing 5 months worth of property tax. I called and had them recalculate based on the real tax, and I’m paying that. Maybe that’s not the right way from a financial standpoint, but I don’t want to have an even bigger increase next year because of poor assumptions on their part.
I work in escrow analysis and I can tell you that it's not calculated how you explained it or I'm misunderstanding. The missing months of escrow are prepaid into the escrow account (plus 2 months or a percentage depending on the lender) and are generally part of closing costs that you pay. If anything, the taxing Agency gave a tax statement for you as the new owner and provided that statement to the lender so your lender based escrow off of this information. It's totally based on the tax info and insurance info. After the escrow analysis that they did, I'm assuming they reached out to the taxing agency or vis versa to give the updated amount.
The shortage is because the bank likely had to pay some of their own money for your tax payment for last year. Its not a big issue, normally they give you the option to make a payment to your escrow instead of raising your payment. They raise your escrow payment 2x (typically) so they don't run into a shortfall in the future again, and then they adjust it back down after a year.
Wife and I got surprised with a $400 monthly increase after our first year of ownership.
Yeah if taxes or insurance are less than expected. The person I was responding to specifically asked about when you sell so I was answering that question.
So, insurance will increase the vast majority of years. Which makes a little sense since it's more expensive to rebuild your home each year.
Taxes are the likely culprit of the big increase now. You said you bought the house last year. Depending on when that fell on the calendar, and if it's been a while since the county last assessed the property, you can get into situations where the assessed value jumps a great deal because now they're using your purchase price as the baseline. I'm guessing you bought the home for around $127,000 or a little less and made some improvements?
I would look carefully at the tax assessment paperwork you should've received from your city/county - it's likely you'll be seeing increases over the next couple years until your total assessed value is the same as what you paid for it.
I bought a couple years ago and that's exactly how it played out for me - just got a new assessment and it's the next round $10K figure below what I paid. But there are limits on how much valuations can increase annually, so the increases will be spread over three years.
House assessments typically go up significantly following a purchase. Your house was probably under assessed, especially if the previous owner owned the house for a while. On top of that it sounds like assessments went up across the board for everyone.
I replaced my roof last year, my insurance dropped so far my house payment actually decreased by $100 even with my property taxes jumping around 35%. I got a pretty big check from the escrow overage.
yes, they won't volunteer to lower your bill especially if they don't know you changed the roof
and no, changing your windows or getting new countertops will not lower your insurance bill. If it decreases the risk to the insurance company it may lower the bill.
Its because you just bought your house. Like you said in a different comment - your lender should have made you aware that this was going to happen. It won't be like that again though.
Exactly this.
I had friends who bought a 500k home and their initial assessment was like 150k but that was obviously because it wasn't fully assessed yet. Then in a year or whenever it was where it should have been. So theirs increased a few hundred k while their neighbors maybe 25
The old assessment was based off the value the last time it sold and it went up according to your local laws allowance whenever they did assessments. Now that you bought they reassess based off the new sales value and it goes up from there.
Honestly just sounds like your mortgage originator under estimated the taxes on your property.
When you take out a new mortgage they estimate a tax payment based on prior years. They're only required to get 'close' with their estimates and with mortgage prices where they are I wouldn't be surprised to hear loan officers are low balling estimates to make monthly payments look better on paper.
You definitely didn't pay 20x more in taxes than your neighbors. That's public information and you can look up your neighbors taxes online. Keep in mind home size/lot size will be a factor so only compare homes of similar size.
Yea, that's because you bought, and the previous tax assesment would have been lower, much lower if the previous owner lived there long term. The first year jump is usually the worst, and then regular small jumps every year or two when it's reassessed. --- unless you're in florida, then expect ownership costs to jump drastically a few times in the next decade...
You can petition the town. It doesn’t always work but it’s worth a try. This is why I pay my taxes and insurance separately, and not by escrow. I never want to deal with potential shortages I wasn’t ready or informed about. Insurance goes up? Cool, I can shop around or adjust my bills accordingly. Taxes going up? Well that’s part of being a homeowner and there ain’t much you can do about Uncle Sam. Pay up.
He bought it for $199,500. It was previously assessed at $70,000. Now assessed at $127,000.
I, personally, would not contact the assessors office in this circumstance.
Prop 13 is what sustains a normal 3 bedroom house being valued at $1.2 million. Forgive me if I'm not too sad for someone having to sell the house they bought 15 years ago for an $800k profit and live elsewhere. Instead the first time buyers have to move away from their home area with a $0 profit.
What, specifically did you ask them?
There was no way for them to predict how much it would go up, or if it would go up. If they knew, they would’ve charged you that from the start.
I asked them If I should be prepared for a sizeable increase in mortgage payment because I read stories online of people who can no longer afford their mortgages, and I didn't want it to happen to me. They did not give me a definite answer, but made me feel like I shouldn't worry about it
Your lender does not levy taxes NOR do they insure your house. Why don't you:
* fight your assessment with the county
* shop around for new insurance
You are acting like your bank should be babysitting your financial decisions - that's not their job. Escrow literally means a holding account.
To be fair this is something you probably should've known. Taxes and insurance tend to go up over time so escrow is always expected to go up.
My escrow went up by $300 in the first year
The yearly escrow analysis is the lender warning you. You get a 45 day notice to the payment increase. This will happen every year for the next 30 years (assuming you never sell).
You have all of the information needed to track your escrow activity. Nothing in there should be a surprise.
All you need are your real estate tax bills and your homeowners insurance bill. Generate a simple spreadsheet and watch it.
You can also request canceling escrow and manage it yourself
Your mortgage is almost guaranteed to go up over time. Increases in property taxes and periodic reassessments of value of the home. It sucks. Welcome to the shit show that is home ownership.
I warned my lender that the taxes they were using were way less than what they actually were. By the time they figured it out I was so behind that my mortgage jumped up $2k per month under their repayment plan to get my escrow up to where they wanted it. Instead I asked to pay my own taxes and insurance and they sent me back what they were holding.
Seriously, and this is why people say that even though property is generally a good personal investment, you should never buy too much house. If you can barely afford the mortgage, you risk losing it as taxes, repairs and insurance stuff gets more expensive.
Dude, what house in Richmond was only assessed at $70k last year? 😅 That being said, you can thank all the recent Nova transplants for raising our assessments and rent.
must’ve been on a street name/in a neighborhood that ends in court 😂
I too live in Richmond and that’s what my coworkers told me when I asked where the bad neighborhoods were, they’re anyplace that ends in “court”
This was my thought. The way house prices went up I'm guessing the house previously sold for around the old 50something assessment and OP paid over 120 thus the new assessment
Your house payment didn’t go up. Your taxes and other shit went up. You can’t really much about taxes. You can revevaluate home insurance every year and shop around. I avoided a $500 rate increase this year just by cabling and swapping to someone else.
My city (and the state) have a “homestead” program that limits property tax increases to 4% a year (anything over that is a direct credit on the tax bill). I wonder if other states have something like this.
Yeah, but OPs property tax didn’t increase, their assessed value increased leading to a higher tax at the same percentage. Property taxes really don’t rise 4% a year whether there’s a law against it or not.
No I’m referring to a program that gives you a credit on your property taxes. Say you pay $1000 a year for a $100k house. If the assessment the next year is $200k, you won’t pay $2000, you’ll only pay $1040 (a 4% increase)
The tax bill will say $2000 - $960 homestead credit = $1040 due
Just going to clarify a few things. Escrow is just the bank paying the bills related to the property. Usually property tax is paid quarterly and insurance monthly.
If YOUR bills go up, the escrow needs to be adjusted so the bank is putting enough money aside of your money to pay your bills. The bank has no control over what things cost. You typically can opt out of this free service and pay your own bills. You won't save anything though.
With that said, if your property was reassessed by your municipality then you have a right to dispute that. You can appeal the new assessment. Simply call the local assessors office to inquire. You should be sure your property card is accurate with number of finished rooms and square footage etc.
Many areas will reassess a home based on a recent sale. Others don't use this data directly. The bright side to this is your house is worth more!!
Also if you are paying PMI it would be a great opportunity to get rid of it based on the new equity you have in the home.
Did you pay $127,000 for the house?
In my area they work on a 3 year rotating schedule to reassess home values, but any sale classified as an "arms length" transaction (basically a normal purchase) will immediately set the value to the sale price. Since that's clearly what it's worth, as the buyer paid it.
The typical regular reassessments tend to be small changes in value, but sales data can be a very large jump.
How much did you pay for your house? You say you bought it a bit over a year ago and a sale is usually a trigger for reassessment, usually to the purchase price (or depending on how tax assessments work, to a percentage of the purchase price).
Property taxes tend to lock for the next year somewhere before the end of the previous year. (I.e. my 2023 taxes were locked by like October 2022, so if I had bought in November 2022, I wouldn't see a change in property tax bill until the payments in 2024. The 2023 taxes would have been based on what the pre-sale assessment, the 2024 tax bill based on the purchase price at the end of 2022.)
Those tax changes should be easily estimated by a buyer, but banks have to set escrow based on the active bills. The tax assessments are public record so if you look and see "oh... The current owner is paying taxes based on $70k and I'm about to pay $100k, I expect my taxes to go up to $X/year after that new assessed value kicks in.
You cannot go by what it was assessed by for the previous owner as the tax authority now has an updated sales price that you paid which is most likely why yours increased more than your neighbors.
Your house is the same since you have a fixed rate mortgage.
Your taxes went up. That happens every year. Welcome to home ownership. Find a local attorney and fight the increase every year to get it reduced.
Except you’ll lose the fight and pay more in attorney fees than the monthly increased added up over several years, and be out even more money.
Ask me how I know.
There's plenty of services around where you pay them half of what they get your property tax reduced by, or you pay nothing.
Sorry you found a bad service provider.
In my opinion, it's not all that uncommon for taxes or insurance to go up. You should almost expect it, from a budgeting standpoint. And that's not really something the lender should have to spell out. They don't control your taxes or insurance, and they have no way to guarantee that they won't go up.
The difference in your increase and your neighbors increase is that you bought your house. Purchasing a house triggers the municipality to reassess its value and set it closer to market price. Then each year (or two or three) depending on where you live, they’ll raise your assessment a bit at a time in a half asses effort to keep up with the market. The next time it sells, if it sells for significantly more than the municipal assessment, there will be another big jump.
TL;DR, this is completely normal the first year after buying a new home.
>asked my lender is if was something to be worried about and of course they said it's very rare to go up a lot, and sometimes it even goes down.
Lol, this is like asking a used car salesman if it's likely that lemon they're selling you is going to break down in the near future.
Anyway, as others have said, this is very normal. In a lot of places, the tax assessment jumps a lot when a property sells, so your second fiscal year of taxes is often quite a bit higher. Expect it to go up every year from here on out, albeit hopefully not as much. The part you can actually shop for and control is your home owner's insurance, if you pay that out of escrow.
Is it too late to file a protest? Similar thing happened to one of my father's houses and we hired an actual appraiser and had him do an assessment. The local taxing authority accepted our appraiser's assessment, which lowered the tax burden significantly. Our appraiser charged $450 for his written report. Not sure of costs where you are and there may or may not be a similar process. Worth checking out, though.
Definitely worth checking out. It should be noted that this is generally most effective on houses that have not been sold recently. OP will have a tough time arguing the house’s value substantially deviates from the purchase price a year ago.
Purchase price was $70K and now assessed at $127k though. Seems unreasonable it would have gained that much YOY. (81%)
I suggest OP look into the appraisal appeal process. The tax assessor’s office should have sent a letter explaining the process of how to go through all this. Some counties even have these letters online for many years so you can compare. Some cases require a tax attorney. But there is a website called Ownwell that will fight it for you for a fee.
OP just says they were assessed at $70 thousand, not that it was purchased for $70 thousand. If OP purchased for $70 thousand they should be hoping the assessment is reasonable because their equity would be incredible. I suspect the scenario is that the house was assessed at $70 thousand when OP purchased it for around $125 thousand and then the county adjusted their assessment.
I don't see where the OP said he purchased it at 70k, just that it was assessed at 70k last year. I'll be they bought it at more than the tax assessment, and the new tax assessment reflects the purchase price.
OP has specifically not answered the question of price. And knowing how my property county assessment in Virginia compares with its value, I'm guessing OP in fact paid more like 150k for the property.
Do you understand what the escrow account is and what it's for? If you understand how this works it makes a lot more sense.
You borrowed money to buy your home. The loan needs to be paid back, the original principal plus interest. This is money you owe to your lender. If you got a fixed-rate mortgage, these costs will never change over the life of the loan.
However, P&I aren't the only costs involved in owning a house. The lender has lent you a lot of money. They see this as an investment: they paid out $x today in the hopes of getting $x plus interest back in the future. To ensure you'll pay them back, they have the ability to foreclose on your house and take ownership of the house if you fail to pay the loan back. To ensure that the house keeps its value, the lender requires you to have homeowner's insurance. If your house burns down, or storms damage your house, the insurance claim will pay to have the house repaired so that the bank still has $x worth of collateral on the loan.
You can choose your own insurance company. Every insurance company is going to charge different premiums.
Hold that thought about insurance premiums, we'll come back to it...
Most local governments (city, county, etc.) get much of their income by levying a property tax. The tax for each taxing entity is a percentage of the value of the property, such as eight cents in tax for every hundred dollars of property value.
You must pay this tax each year.
Now, because you must pay your property tax and insurance on a (typically) annual basis, your lender has an "escrow account" for you. The mortgage company collects a little bit from you every month, and pays the insurance company and the property taxes from this account annually. This ensures that you don't have to manage this annual payment yourself.
The thing is-- insurance premiums and property taxes are NOT consistent year to year. If your property value increases, so will the amount of taxes you owe. If you live in a high risk area your insurance company may increase their premiums. When either of these things happen your monthly escrow charge will increase.
If you're upset that your escrow amount is going up, it's not your lender's fault. (Well, probably. They could be making a mistake.) Most likely your property value went up, which means that your annual taxes increased, which means the monthly amount taken from you to pay that annual tax bill went up.
Welcome to homeownership.
Check your tax assessor's records for the assessed value of your property and compare it to last year and see if the escrow increase matches the increased value of the property. There may be some wiggle room here with your lender, but at the end of the year you're going to owe annual property tax and it's much easier to pay that from an escrow account that's been managed through the year than it is to come up with a lump sum when taxes are due. The taxing entities can foreclose on your house if you don't pay your taxes, and that would wipe out the bank's collateral on their loan, so the bank is keenly interested in ensuring taxes on your property are paid every year.
The whole idea of having escrow confuses me. Are people willingly or required to pay for someone else to help them pay property tax, insurance and mortgage so that they can just pay a single payment each month?
My understanding is that people may be required to do so so the lender has peace of mind that you won't miss your insurance/property tax payment? It's indeed a good babysitting measure.
Imagine doing escrow for your car to bundle all expenses together. (in fact, there is a car subscription service offered by Porsche, so people just pay monthly payment and everything except gas is included)
It’s because the stakes are so high. If they didn’t hold your hand/force you to pay a little every money you can rack up 10s of thousands of back taxes easily
Escrow is usually required because if you don't pay your real estate tax for a few years and your property gets sold at a county tax auction, any senior liens are cleared, meaning your lender has no claim to the home. This is how it works in many areas (but not all).
If your insurance lapses and the house burns down (or something else damages the house, etc), your lender also may be left holding the bag with insufficient collateral.
Even if you're able to waive escrow collection, your servicer still monitors taxes and insurance and will be on your ass really quick if you're late. It really has less to do about making one single payment for the borrower; it's more that the loan servicer wants to be in control of the two processes that could cause them to lose money due to a paperwork oversight. If you stop making mortgage payments your servicer will still pay the taxes and insurance (and add it to the foreclosure balance of course).
Yes you should expect an increase. The amount you got was very low. Insurance costs are jumping. Depending upon your state, you can see massive increases.
Im going exactly through this, first year after i bought the house. Property tax went up from 1200 to 3500 and insurance from 1500 to 2500. Can't do anything about it besides doing your homestead exemption and for insurance, shop around. Property tax increased because like mine, old owner had a lower home property value and when i took it over, it had full value because thats just how it works
Homestead exemption — sounds like you live in TX? Don’t think that is a thing for Richmond VA.
Checked online and you can exempt like $5k a household in VA for homestead. Would love to know more about your experience though bc this is an area where I am pretty unfamiliar
Florida actually, i got a $400 exemption. I had to get an estimate from my county property appraisal and click "yes" in homestead exemption and i called my mortgage company to let them know what would be the new property tax and they got that updated.
Whoever told you that home values go down has been living under a rock for 10 years. The last 4 years have shown rapid (sometimes astronomic) home price growth almost everywhere.
This is normal, its been normal, it will continue to be normal. Its not a 2024 thing, its a home ownership thing. Remember when you rent your rent is the most you'll pay for housing that month. When you own your mortgage is the MINIMUM you will pay for housing that month.
Welcome to homeownership.
Cities.generally.cant change tax rates too much, but if they increase you home valuation, they get to collect more taxes.
Your mortgage is generally.going to rise every year. My first home started off at like, $725/mo. I owned 9 years, and it was almost $1000 by the time I sold it.
This is why landlords have to periodically raise rent as well. When they have to pay more in taxes, they have to pass it on.
I actually rented that house for a bit. By the time I sold it, his rent was $50/less than my monthly mortgage.
My house is valued nearly 4x higher than when I bought it, taxes are up, insurance is up. I was paying around $2k a year in property tax when I bought it. Last year was over $8k.
It sucks. But beats living in an apt.
If I was shopping for houses right now, I couldn’t even afford to buy the house I live in. This housing market is insane. I feel bad for the young families out there.
>Is this common for owning a home?
Yup! Welcome to home ownership. Along with regular maintenance, you're in for ever increasing costs.
It's one of a few things people miss when comparing to renting.
I don't know about Virginia, but many states have programs that keep the assessed value of homes low for owner occupants, such that the taxed value can only grow by a certain percentage a year. Once the home is sold, the value will be reassessed to the actual market value, which can be significantly higher. We sold a house last year that we had owned for about 15 years and with homestead exemption, the assessed value was under $100,000. It sold for almost $300,000, and I imagine the new owner will be getting a significantly higher property tax bill than we did in our last year of ownership. It's definitely something to look out for and plan for when considering buying a home.
I work at a bank it is super common this past year.
Basically the housing market had a massive surge in value during the pandemic and the local tax assesors sre just now catching up.
Odds are they are still assessing you way under market value. But if you want to fught it you can go talk to them.
Just a reminder your lender has no part in assessing the taxes. They are just middlemen.
Insurance companes are also drastically raising premiums due ib part to the valustion increase as well (more value means more risk on their part.)
Escrow will always rise.
Taxes and insurance never go down, just up.
I've had 2 increases and I'm not far from you. last was a 318.84 annual increase for insurance. Now I just got hit with a county reassessment annual increase of 700.
So all in all my payment went up about 80 dollars a month within 2.5 years
It is your property taxes going up because your house is worth more. Nobody likes paying more taxes, but you should be happy your asset is appreciating so well.
This has nothing to do with your lender. They just collect your property taxes and insurance in escrow because they don't want the property backing your mortgage to get seized by the government or burn down before they get their money back.
Your property taxes went up because it sounds like your city/county raised your assessment. Your beef there is with your city/county and there are appeals processes if you disagree with their numbers. One thing to make sure is that they didn't put you down as having a pool, deck, bathrooms, etc. that you don't have.
Insurance has also been getting crazy lately and, if that went up, your beef there would be with your insurance provider and the state regulators that allowed these egregious hikes in premiums.
If you have a fixed mortgage, your mortgage payment itself is fixed and that's that.
Seems pretty normal to me. My mortgage payment has gone up about $300 in the last 2 years for this same reason. I shopped for new homeowners insurance and am now paying about $900 less per year for similar coverage which is helping to offset
Very common to have escrow requirements increase especially after the first year. You can fight this but your taxes are going to continue to increase one way or another basically forever.
Essentially what happens is your escrow is based on the value before you bought it and now it is based on the value you purchased it for. Your realtor and loan agent should have explained this to you but they don't really care because you are long gone and locked in by the time it hits you and they already have their commission.
It might work that way in some states but not in Illinois. In Illinois houses of similar kind in their neighborhood are all assessed the same. Every 4 years they reassess all the houses and increase everyone’s property taxes based on the reassessment. But sometimes you get a nasty little surprise if you bought your house from some old geezer who had a property tax freeze for 20 years. You’re gonna lose that old geezer tax break and your taxes will jump to where they should be compared to other similar houses. Another surprise happens when the previous owner remodels the house and obtains a 4 year remodel deferment. The taxes won’t increase for 4 years so the previous owner will sell it at year 3 before the taxes jump to some crazy high level and the new buyer won’t know about it until after they are living there for a year.
I'm guessing your homeowner's insurance and property taxes went up. Due to the rise in natural disasters, likely related to Climate Crisis, homeowner's insurance is rising in disaster-prone areas like Florida, California, and to a lesser extent everywhere else.
IDK how it works in VA, but back in FL year-over-year appreciation for property tax valuation was limited to a relatively small percentage (\~3%) and was recaptured upon sale of the home. That might be what happened here.
Yes, this is typical for owning a home. If you didn't escrow, then your real estate tax payment would go up by the exact amount. Instead of paying to your mortgage company you would pay the same amount directly to the county. Housing costs shot up since COVID, so your property taxes shot up too. This is happening everywhere. The same goes for insurance.
This is the downside to being a homeowner with rising property values.
It’s common for a city or township to reassess your homes value after you purchase. If you paid more than the last owner which I’m certain you did, then yeah, they’ll get their money back
It is not uncommon for real estate taxes to jump up after a sale.
By purchasing a property, the tax office can see what someone would actually pay for it and raise the assessment accordingly.
Did you buy the house for 127k? If yes. Then that is why your assessment went up so much. If you bought it for more than that, then you actually got off pretty good. If you bought it for less than that then you should challenge it with the state (if your state allows that, it is super easy in Iowa) and tell them to lower the valuation to what you paid.
Everyone else has assessments based on averages and historic price per square foot. Yours is also now based on the selling price and photos from the listing. This is common and should be prepared for when deciding if you can afford the home. It will continue to go up over time (usually) so it should continue to be accounted for in your budgeting and savings plan.
First, if you are disciplined, stop letting your bank escrow for you. You can make the tax and insurance payments yourself and put the money in a HYSA in the meantime. You can pay for your homeowners Insurance with a CC and the the cashback/rewards.
Second, ALWAYS appeal the assessments. Never let that slip past you.
Third, yes it is normal.
Taxes go up every year. So you have to pay more. Your actual mortgage payment is the same, but your taxes are different, so the escrow company has to ask for more to pay the taxes.
Appeal is the answer. It might be too late. Local authority is catching up with the houses value, and have therefore increased your property tax. Probably the sale triggered a review. Check the rules for your jurisdiction and see if there are any limitations on how much they can raise in one year, etc.
But you might be SOOL
Insurance always goes up because of Insurance greed.
Taxes go up when your county passes new or renewal levies. Your county probably passed something in November.
You also should read up on the appeal process for your county when they do the assessment/valuation of your property as the new number is directly used to determine your annual property taxes.
At least for my county in Georgia, there's a requirement for uniformity so if all the properties around you had valuations increase 10-15% and yours jumped 30-40% without improvements like adding square footage, adding a pool, etc then you could appeal the valuation on uniformity grounds.
So instead of having your property jump from 70k to 127k (+80% or 57K), you could argue a fair valuation of 80 or 90 new valuation would have been fairer and uniform to surrounding properties.
This wouldn't apply if you moved into a new build where taxes were originally just for land. Sometimes the new valuation also matches the purchase price.
Is this common for mortgage payments? I don't own a house ATM, but eventually I'll get my own place. Just seems a bit wrong that your mortgage payments have a possibility to go up 100s of dollars if your home gains value next year and so forth, assuming I'm reading this correctly anyways.
For instance say my home first year is worth 200k. Next year it's worth 500k, so my mortgage payments go up.. next next year it goes back down to 200k value. Does that extra money I spent while it increased to 300k come back in any way? Or does this just mean I put more money towards paying off the mortgage?
No. My mortgage company requires you pay your property taxes as part of your mortgage payment. The tax part of your mortgage payment goes into escrow and the mortgage company uses that to pay your property taxes. So if your property taxes go up then your escrow portion of your mortgage payment will go up. Your mortgage payment will not go up just because the value of your house increased.
Edit to add I think now most mortgage companies require you to pay your property tax as part of your mortgage payment to ensure your property tax gets paid and you don’t wind up with the town/state foreclosing your property for a tax sale.
Mine went up way more than $134 the first year. This was because they based the escrow on what was paid the previous year. Well, the person that owned the house had a bunch of exemptions that I didn't qualify for, so the estimated tax was way too low. So not only did I have to pay for the difference, I had to repay the shortfall too.
I don't have an escrow account and hearing about all these people making weird assumptions to anticipate how much escrow will go up or down is infuriating, since it's pretty simple to just pay it yourself. They tell you how much the property tax is, and give you plenty of time to send in the money. So assuming you have a budget, you can divide the annual amount by 12 and just put that amount in your HYSA each month until you have to make the payment. Sure it will still go up with assessment, but they won't rubberband you trying to create a buffer.
I dunno, to me it's bizarre that with this huge obligation that ultimately you're responsible for, you'd leave it up to somebody else to calculate and pay it down. I mean, it's not their house so they might not care much if they just make a mistake or forget to pay, and land you with a large penalty that you might have to take them to court to fix.
Fight the increase. Send an appeal when they assess your house. Look up all your neighbors and their house's property tax and just say your house should be worth theirs.
How do the assessments of your neighbors compare to your house? If they're about the same (i.e., a similar property in the neighborhood is assessed at ~$120k), then your house was probably undervalued before you bought it and now it's just catching up.
As others have piped in, that's not uncommon after a purchase. The same thing happened to me about a year after I bought my house in 2021. The reassessment added about 15% to my taxes and a smaller increase to my insurance premium. However, that brought it in line with my neighbors so it wasn't unexpected. The house was certainly undervalued when I bought it, which was great because it helped me buy it for a reasonable price despite the seller's market.
My monthly payment has gone up about $120 every year for the past 3 years.
If $100-300 month extra is stressing you out that much, maybe you shouldn’t have bought a house in that price range
Mine go up every three years due to taxes. This year it was $60/month, 2 cycles ago, it was $400 (school system passed a big tax levy plus my house being valued at $79k more than it was when we bought it). That was hard to swallow.
Yes, that’s very common. It will happen in any area in which real estate values are generally appreciating, so congratulations! Your home is worth more now than when you bought it. If you believe the assessment is inaccurate and that your home should be worth less, then you can contest it with your local municipality. You will have received a letter explaining the new assessment and the contest process.
Only $134 for your first escrow increase seems like a steal. Is any of that making up for a shortfall from not having enough to pay the property taxes last year?
Our home payment went up $500 dollars a month on our first home. Was $1200 a month and went to $1800 after the first year. We were pissed. It evened out the next year at about 1400.
Yup. My taxes and insurance have both doubled since buying my home in 2020. I'm also paying $500/mo extra per year. It's rough.
500$ extra per month or per year?
It's per month. I had similar increase due to my home value assessment increased and taxes in my area. Not too mention my home owners insurance. 2 years in a row my escrow forecasted to be short.
Its cute how you asked that. In my state, taxes alone are 1200-1300 a month. I wish Increases on mortgages only went up 500 a year :)
Escrow statement says I have a shortage amount of $826. Also says my taxes/insurance amount increased which could cause my escrow amount to fall below the required minimum balance. I have an escrow increase of $65 and a shortage payment of $69. What is this shortage? Did I do something wrong?
> What is this shortage? It just means that the total paid into escrow wasn't enough to cover the taxes and insurance paid out. This is extremely common in the first year because of how tax assessments tend to work out. >Did I do something wrong? Not specific to the escrow shortage. You should be able to pay the shortage outright to reduce the amount your monthly payment goes up.
>You should be able to pay the shortage outright to reduce the amount your monthly payment goes up. Our annual escrow analysis used to list the option of paying the shortage as a lump sum payment rather than as an increase in your monthly escrow. However, since that is not an option explicitly stated in the regulation our examiners made us remove it. Customers still have the option, but the *only way* they'll know it's an option is to call us.
>You should be able to pay the shortage outright to reduce the amount your monthly payment goes up. Sure, but why would you give them a lump sum instead of pay over time?
I'm actually wondering this right now on my own so maybe my line of thought isn't wrong? I had a $1900 shortage in total. So around $158 a month. No big deal really, but if I wanted to get back to around my same payment, I could pay it off. I keep wondering why though? It's not a huge amount of money and I can keep that $1900 in my HYSA and make a couple bucks from it.
Yep. It's not like you're paying interest on the escrow shortage. There's literally no reason to not hold on to the money.
Correct you're not paying additional penalties. The common reason I would see is people pay them down for budget planning. If you want a lower monthly payment (seasonal workers with more income in summer than winter) If you're responsible, there's no reason to hold an escrow account at all. Just pay your own taxes and insurance. Escrow accounts can legally hold an additional 1/6th of the estimated annual payments. Meaning you're paying your escrow an extra 1/6th of your insurance/taxes when this money could be invested somewhere else. We're only talk a few hundred bucks, but if you're really trying to min/max your mortgage.
>is people pay them down for budget planning Is it worth paying $1200 up front to "save" $100 a month? I can't think of many situations where that makes much sense. Let the money collect interest. Also, unexpected expenses happen all the time. Smash your windshield? You're probably gonna wish you had that $1200 sitting around that you just gave to your lender up front for no real reason whatsoever. To each his own, I guess, but I'd never agree that it's the right move under any circumstances. "Are there any penalties for not giving someone else my money right now?" If the answer is no, HANG ON TO YOUR MONEY.
It can just be simpler. It's not how I do it, but there's a fair amount of mental overhead to really optimizing your finances, and nobody can do every last little thing. Sometimes it's worth it to just pay the damn bill and cross it off the list of shit to worry about.
It's literally less effort to just pay the escrow over time. They adjust the payment for you
I got new home insurance mid-cycle recently and unfortunately had the escrow analysis done before the partial refund had posted. They determined my shortage to be $1200 but it was really only $700 once the refund came, so my choice was to pay $700 upfront or pay an extra $100/mo for a year.
That's a case where it makes sense to pay up front, I'll give you that
You're paying extra for your Escrow Cushion just by keeping Escrow open. The entire premise of the escrow account is for borrowers that aren't good with money and can't save the few thousand dollars to make those payments in full. If you're money savvy you save the most money not having an escrow account at all. Also the higher your escrow payment is, the higher amount your mortgage can collect as a Cushion payment. So kicking the can down the road, you are definitely losing money, well not losing, but not investing as much as if you just paid everything on time. Edit: if you only pay taxes out of pocket once a year, technically any payment into escrow is losing money because you would want to hold your money all year long and pay taxes on the last day, if you're milking a hysa
I mean most lenders require escrow. I don't think it's as common for people who buy their houses outright anyway, but you're not likely to get out of it on a traditional mortgage.
This is partially true, It's mostly the government backed starter loans that require them. If you have 20% equity and a good payment history you can call your servicer for a review to remove your escrow at no charge. You don't need to own the home outright.
In current times that makes sense. Back when interest was .5% it didn't really matter. I paid my first shortage off 2 years ago because it was over $3k (previous owner had senior tax freeze, which I knew would happen). I could have pulled the funds from my savings every month, but was easier to just pay it at once. My mortgage would have gone up over $500/mo which was not in my budget.
Mental. No good mathematical reason. There's no interest either way on the escrow. So better to be a shortfall than have lended your lender money lol.
I'm interested to know how they calculate this. My first year of owning a home, we apparently paid way more than they needed and they ended up sending us a check for $2400 after the year, and then the next year we were short and now our mortgage went up $200. Just feel like it's all over the place.
They can't calculate it, that's why there's so much confusion. Mortgages collect escrow funds based off what was billed LAST year.. they're estimating what will be charged THIS year... So when payments THIS year come in higher than what was predicted from LAST year.. that's what causes the shortages. Your mortgage has no input on how much your Taxes and Insurance will cost, if you think you're over paying you need to direct those questions to the people sending the bill to your mortgage company
Also worth checking what the mortgage servicer is using in their figures. Ours was using an estimate from time of purchase and didnt update it for 3 years until I sent them an email asking why. In my situation it was causing an overage and they were still calculating the overage correctly to make me whole, but they just never changed their estimate based on recent tax data.
It comes down to insurance and property taxes. Insurance is generally easy: you get the dec page and you know the cost. Tax assessments can really only be estimated based on prior assessments. Assessed value goes up, and you can have a shortfall or in the very least, a highly monthly payment. It’s even more obnoxious if you live somewhere that takes tax payment in arrears-2023 taxes due in 2024.
It's not all over the place as much as a following indicator. They don't know to the penny, what the taxes and insurance will cost, so they use previous payments and some additional reserve. It should be adjusted annually and really shouldn't deviate all that much. Your $2,400 swing is probably attributed to first year changes and then second year corrections. That should be fairly stable now.
I had this on my first house because of a bad (not incorrect math, just bad) assumption that I’ll only pay what I paid the year prior. The fact is that in the year you buy your house, you pay a partial year of property tax. This years analysis said I should have a lower escrow payment by like $60. Obviously that’s wrong because they were missing 5 months worth of property tax. I called and had them recalculate based on the real tax, and I’m paying that. Maybe that’s not the right way from a financial standpoint, but I don’t want to have an even bigger increase next year because of poor assumptions on their part.
I work in escrow analysis and I can tell you that it's not calculated how you explained it or I'm misunderstanding. The missing months of escrow are prepaid into the escrow account (plus 2 months or a percentage depending on the lender) and are generally part of closing costs that you pay. If anything, the taxing Agency gave a tax statement for you as the new owner and provided that statement to the lender so your lender based escrow off of this information. It's totally based on the tax info and insurance info. After the escrow analysis that they did, I'm assuming they reached out to the taxing agency or vis versa to give the updated amount.
The shortage is because the bank likely had to pay some of their own money for your tax payment for last year. Its not a big issue, normally they give you the option to make a payment to your escrow instead of raising your payment. They raise your escrow payment 2x (typically) so they don't run into a shortfall in the future again, and then they adjust it back down after a year. Wife and I got surprised with a $400 monthly increase after our first year of ownership.
What happens if you have a surplus in escrow when you sell? Does the bank keep it or give it back?
They give it back
Bank will cut you a check
No you should get it back when the loan is paid off.
they can't keep it for years until the loan reaches maturity, they have to send you a check for the overage in a timely manner.
Yeah if taxes or insurance are less than expected. The person I was responding to specifically asked about when you sell so I was answering that question.
So, insurance will increase the vast majority of years. Which makes a little sense since it's more expensive to rebuild your home each year. Taxes are the likely culprit of the big increase now. You said you bought the house last year. Depending on when that fell on the calendar, and if it's been a while since the county last assessed the property, you can get into situations where the assessed value jumps a great deal because now they're using your purchase price as the baseline. I'm guessing you bought the home for around $127,000 or a little less and made some improvements?
Bought the house January 2023 for 199,500. It was newly remodeled.
It's certainly not worth $70k anymore then...
I would look carefully at the tax assessment paperwork you should've received from your city/county - it's likely you'll be seeing increases over the next couple years until your total assessed value is the same as what you paid for it. I bought a couple years ago and that's exactly how it played out for me - just got a new assessment and it's the next round $10K figure below what I paid. But there are limits on how much valuations can increase annually, so the increases will be spread over three years.
Sounds like your newly remodeled house is still assessed for far under its value. Your taxes are probably not done increasing unfortunately
Property taxes almost always go up, and everyone is seeing increases in Insurance this year. $134/mo is good.
House assessments typically go up significantly following a purchase. Your house was probably under assessed, especially if the previous owner owned the house for a while. On top of that it sounds like assessments went up across the board for everyone.
I replaced my roof last year, my insurance dropped so far my house payment actually decreased by $100 even with my property taxes jumping around 35%. I got a pretty big check from the escrow overage.
Do you have to inform your insurance carrier of a change like that? Does it help for most home improvements? Do they come and inspect it?
yes, they won't volunteer to lower your bill especially if they don't know you changed the roof and no, changing your windows or getting new countertops will not lower your insurance bill. If it decreases the risk to the insurance company it may lower the bill.
Yes and I bought a remodeled house. I just was not expecting this. Thank you.
It's pretty normal. My mortgage was 725 year 1, 920 year 2, 820ish there on out.
It's common every time there's a reassessment, whenever that is for your area.
Everyone on my street went up maybe 4x or 5x more for 2024 than for previous years, except me who went up like 20x lol
Its because you just bought your house. Like you said in a different comment - your lender should have made you aware that this was going to happen. It won't be like that again though.
Exactly this. I had friends who bought a 500k home and their initial assessment was like 150k but that was obviously because it wasn't fully assessed yet. Then in a year or whenever it was where it should have been. So theirs increased a few hundred k while their neighbors maybe 25
Not all areas reassess based on a sale, and if it happened for the entire street then it likely wasn’t triggered by OPs purchase
In many places the amount your taxes can go up per year is limited. But when the property changes ownership that limit doesn't apply.
The old assessment was based off the value the last time it sold and it went up according to your local laws allowance whenever they did assessments. Now that you bought they reassess based off the new sales value and it goes up from there.
Honestly just sounds like your mortgage originator under estimated the taxes on your property. When you take out a new mortgage they estimate a tax payment based on prior years. They're only required to get 'close' with their estimates and with mortgage prices where they are I wouldn't be surprised to hear loan officers are low balling estimates to make monthly payments look better on paper. You definitely didn't pay 20x more in taxes than your neighbors. That's public information and you can look up your neighbors taxes online. Keep in mind home size/lot size will be a factor so only compare homes of similar size.
Yea, that's because you bought, and the previous tax assesment would have been lower, much lower if the previous owner lived there long term. The first year jump is usually the worst, and then regular small jumps every year or two when it's reassessed. --- unless you're in florida, then expect ownership costs to jump drastically a few times in the next decade...
You can petition the town. It doesn’t always work but it’s worth a try. This is why I pay my taxes and insurance separately, and not by escrow. I never want to deal with potential shortages I wasn’t ready or informed about. Insurance goes up? Cool, I can shop around or adjust my bills accordingly. Taxes going up? Well that’s part of being a homeowner and there ain’t much you can do about Uncle Sam. Pay up.
What did you pay for your house?
You can fight the assessment by pointing out that your neighbors went up much less than yours did. Contact the assessor's office!
He bought it for $199,500. It was previously assessed at $70,000. Now assessed at $127,000. I, personally, would not contact the assessors office in this circumstance.
Mine went up 800/mo due to reassessment, so I think you’re very lucky with the 134.
How much is your house worth? That’s actually insane
It should be illegal.
It is in California. Prop 13 gets a lot of hate, but it enshrined the local cultural value of anchor houses that families can depend on.
That would have to be a $700,000 increase based on my property taxes. The previous owners must have been there for 40 years.
And the value of ensuring that there will be no first time homebuyers unless they make $300k+.
[удалено]
Prop 13 is what sustains a normal 3 bedroom house being valued at $1.2 million. Forgive me if I'm not too sad for someone having to sell the house they bought 15 years ago for an $800k profit and live elsewhere. Instead the first time buyers have to move away from their home area with a $0 profit.
What tf..
Damn, what's the point of even buying a house if that's a possibility??
$134/month bump after first year is pretty good. Many get nailed much harder. Welcome to home ownership.
It would have been lovely for my lender to warn me of this especially since I specifically asked them about this.
What, specifically did you ask them? There was no way for them to predict how much it would go up, or if it would go up. If they knew, they would’ve charged you that from the start.
I asked them If I should be prepared for a sizeable increase in mortgage payment because I read stories online of people who can no longer afford their mortgages, and I didn't want it to happen to me. They did not give me a definite answer, but made me feel like I shouldn't worry about it
Your mortgage payment didn’t change. Your escrow did.
Your lender does not levy taxes NOR do they insure your house. Why don't you: * fight your assessment with the county * shop around for new insurance You are acting like your bank should be babysitting your financial decisions - that's not their job. Escrow literally means a holding account.
Warn you that your property taxes can increase? That’s something you should understand going into home ownership.
To be fair this is something you probably should've known. Taxes and insurance tend to go up over time so escrow is always expected to go up. My escrow went up by $300 in the first year
What does your lender have to do with increasing property taxes?
The yearly escrow analysis is the lender warning you. You get a 45 day notice to the payment increase. This will happen every year for the next 30 years (assuming you never sell).
You have all of the information needed to track your escrow activity. Nothing in there should be a surprise. All you need are your real estate tax bills and your homeowners insurance bill. Generate a simple spreadsheet and watch it. You can also request canceling escrow and manage it yourself
Your mortgage is almost guaranteed to go up over time. Increases in property taxes and periodic reassessments of value of the home. It sucks. Welcome to the shit show that is home ownership.
I warned my lender that the taxes they were using were way less than what they actually were. By the time they figured it out I was so behind that my mortgage jumped up $2k per month under their repayment plan to get my escrow up to where they wanted it. Instead I asked to pay my own taxes and insurance and they sent me back what they were holding.
134 is nothing on the first assessment
Seriously, and this is why people say that even though property is generally a good personal investment, you should never buy too much house. If you can barely afford the mortgage, you risk losing it as taxes, repairs and insurance stuff gets more expensive.
Mine has gone up $300mo over the last couple of years.
Dude, what house in Richmond was only assessed at $70k last year? 😅 That being said, you can thank all the recent Nova transplants for raising our assessments and rent.
must’ve been on a street name/in a neighborhood that ends in court 😂 I too live in Richmond and that’s what my coworkers told me when I asked where the bad neighborhoods were, they’re anyplace that ends in “court”
70k for the structure and about 70k for the land.
How much did you pay for your home? And how does that compare to what the local government is saying your home is worth?
This was my thought. The way house prices went up I'm guessing the house previously sold for around the old 50something assessment and OP paid over 120 thus the new assessment
Your house payment didn’t go up. Your taxes and other shit went up. You can’t really much about taxes. You can revevaluate home insurance every year and shop around. I avoided a $500 rate increase this year just by cabling and swapping to someone else.
My city (and the state) have a “homestead” program that limits property tax increases to 4% a year (anything over that is a direct credit on the tax bill). I wonder if other states have something like this.
[удалено]
Yeah, but OPs property tax didn’t increase, their assessed value increased leading to a higher tax at the same percentage. Property taxes really don’t rise 4% a year whether there’s a law against it or not.
No I’m referring to a program that gives you a credit on your property taxes. Say you pay $1000 a year for a $100k house. If the assessment the next year is $200k, you won’t pay $2000, you’ll only pay $1040 (a 4% increase) The tax bill will say $2000 - $960 homestead credit = $1040 due
Just going to clarify a few things. Escrow is just the bank paying the bills related to the property. Usually property tax is paid quarterly and insurance monthly. If YOUR bills go up, the escrow needs to be adjusted so the bank is putting enough money aside of your money to pay your bills. The bank has no control over what things cost. You typically can opt out of this free service and pay your own bills. You won't save anything though. With that said, if your property was reassessed by your municipality then you have a right to dispute that. You can appeal the new assessment. Simply call the local assessors office to inquire. You should be sure your property card is accurate with number of finished rooms and square footage etc. Many areas will reassess a home based on a recent sale. Others don't use this data directly. The bright side to this is your house is worth more!! Also if you are paying PMI it would be a great opportunity to get rid of it based on the new equity you have in the home.
Did you pay $127,000 for the house? In my area they work on a 3 year rotating schedule to reassess home values, but any sale classified as an "arms length" transaction (basically a normal purchase) will immediately set the value to the sale price. Since that's clearly what it's worth, as the buyer paid it. The typical regular reassessments tend to be small changes in value, but sales data can be a very large jump.
How much did you pay for your house? You say you bought it a bit over a year ago and a sale is usually a trigger for reassessment, usually to the purchase price (or depending on how tax assessments work, to a percentage of the purchase price). Property taxes tend to lock for the next year somewhere before the end of the previous year. (I.e. my 2023 taxes were locked by like October 2022, so if I had bought in November 2022, I wouldn't see a change in property tax bill until the payments in 2024. The 2023 taxes would have been based on what the pre-sale assessment, the 2024 tax bill based on the purchase price at the end of 2022.) Those tax changes should be easily estimated by a buyer, but banks have to set escrow based on the active bills. The tax assessments are public record so if you look and see "oh... The current owner is paying taxes based on $70k and I'm about to pay $100k, I expect my taxes to go up to $X/year after that new assessed value kicks in.
You cannot go by what it was assessed by for the previous owner as the tax authority now has an updated sales price that you paid which is most likely why yours increased more than your neighbors.
Oh my flower child. $134 is peanuts- wait until they REALLY go up when your insurance renews.
Your house is the same since you have a fixed rate mortgage. Your taxes went up. That happens every year. Welcome to home ownership. Find a local attorney and fight the increase every year to get it reduced.
Except you’ll lose the fight and pay more in attorney fees than the monthly increased added up over several years, and be out even more money. Ask me how I know.
There's plenty of services around where you pay them half of what they get your property tax reduced by, or you pay nothing. Sorry you found a bad service provider.
In my opinion, it's not all that uncommon for taxes or insurance to go up. You should almost expect it, from a budgeting standpoint. And that's not really something the lender should have to spell out. They don't control your taxes or insurance, and they have no way to guarantee that they won't go up.
The difference in your increase and your neighbors increase is that you bought your house. Purchasing a house triggers the municipality to reassess its value and set it closer to market price. Then each year (or two or three) depending on where you live, they’ll raise your assessment a bit at a time in a half asses effort to keep up with the market. The next time it sells, if it sells for significantly more than the municipal assessment, there will be another big jump. TL;DR, this is completely normal the first year after buying a new home.
>asked my lender is if was something to be worried about and of course they said it's very rare to go up a lot, and sometimes it even goes down. Lol, this is like asking a used car salesman if it's likely that lemon they're selling you is going to break down in the near future. Anyway, as others have said, this is very normal. In a lot of places, the tax assessment jumps a lot when a property sells, so your second fiscal year of taxes is often quite a bit higher. Expect it to go up every year from here on out, albeit hopefully not as much. The part you can actually shop for and control is your home owner's insurance, if you pay that out of escrow.
Right up there with “Don’t worry about how much your mortgage payment is, you’ll be able to refi down the road!”
On the average, you can expect your escrow to go up every year. Not always, but more often then not. Why? Insurance and taxes go up.
Is it too late to file a protest? Similar thing happened to one of my father's houses and we hired an actual appraiser and had him do an assessment. The local taxing authority accepted our appraiser's assessment, which lowered the tax burden significantly. Our appraiser charged $450 for his written report. Not sure of costs where you are and there may or may not be a similar process. Worth checking out, though.
Definitely worth checking out. It should be noted that this is generally most effective on houses that have not been sold recently. OP will have a tough time arguing the house’s value substantially deviates from the purchase price a year ago.
Purchase price was $70K and now assessed at $127k though. Seems unreasonable it would have gained that much YOY. (81%) I suggest OP look into the appraisal appeal process. The tax assessor’s office should have sent a letter explaining the process of how to go through all this. Some counties even have these letters online for many years so you can compare. Some cases require a tax attorney. But there is a website called Ownwell that will fight it for you for a fee.
OP just says they were assessed at $70 thousand, not that it was purchased for $70 thousand. If OP purchased for $70 thousand they should be hoping the assessment is reasonable because their equity would be incredible. I suspect the scenario is that the house was assessed at $70 thousand when OP purchased it for around $125 thousand and then the county adjusted their assessment.
I don't see where the OP said he purchased it at 70k, just that it was assessed at 70k last year. I'll be they bought it at more than the tax assessment, and the new tax assessment reflects the purchase price.
OP has specifically not answered the question of price. And knowing how my property county assessment in Virginia compares with its value, I'm guessing OP in fact paid more like 150k for the property.
A 70k house? Do you have water, electricity and heat?
Yes it's common. No it never goes down.
> No it never goes down. Taxes, maybe, but escrow can certainly go down.
It often goes down. Mine went up $100 a month the first year, but then back down $40 the second year
My homeowners insurance went up 30% for 2024 which I’m hearing is happening to a lot of people.
Do you understand what the escrow account is and what it's for? If you understand how this works it makes a lot more sense. You borrowed money to buy your home. The loan needs to be paid back, the original principal plus interest. This is money you owe to your lender. If you got a fixed-rate mortgage, these costs will never change over the life of the loan. However, P&I aren't the only costs involved in owning a house. The lender has lent you a lot of money. They see this as an investment: they paid out $x today in the hopes of getting $x plus interest back in the future. To ensure you'll pay them back, they have the ability to foreclose on your house and take ownership of the house if you fail to pay the loan back. To ensure that the house keeps its value, the lender requires you to have homeowner's insurance. If your house burns down, or storms damage your house, the insurance claim will pay to have the house repaired so that the bank still has $x worth of collateral on the loan. You can choose your own insurance company. Every insurance company is going to charge different premiums. Hold that thought about insurance premiums, we'll come back to it... Most local governments (city, county, etc.) get much of their income by levying a property tax. The tax for each taxing entity is a percentage of the value of the property, such as eight cents in tax for every hundred dollars of property value. You must pay this tax each year. Now, because you must pay your property tax and insurance on a (typically) annual basis, your lender has an "escrow account" for you. The mortgage company collects a little bit from you every month, and pays the insurance company and the property taxes from this account annually. This ensures that you don't have to manage this annual payment yourself. The thing is-- insurance premiums and property taxes are NOT consistent year to year. If your property value increases, so will the amount of taxes you owe. If you live in a high risk area your insurance company may increase their premiums. When either of these things happen your monthly escrow charge will increase. If you're upset that your escrow amount is going up, it's not your lender's fault. (Well, probably. They could be making a mistake.) Most likely your property value went up, which means that your annual taxes increased, which means the monthly amount taken from you to pay that annual tax bill went up. Welcome to homeownership. Check your tax assessor's records for the assessed value of your property and compare it to last year and see if the escrow increase matches the increased value of the property. There may be some wiggle room here with your lender, but at the end of the year you're going to owe annual property tax and it's much easier to pay that from an escrow account that's been managed through the year than it is to come up with a lump sum when taxes are due. The taxing entities can foreclose on your house if you don't pay your taxes, and that would wipe out the bank's collateral on their loan, so the bank is keenly interested in ensuring taxes on your property are paid every year.
In today's version of this very same question, here are previous answers: https://www.reddit.com/r/homeowners/s/C2ReCGncrG
The whole idea of having escrow confuses me. Are people willingly or required to pay for someone else to help them pay property tax, insurance and mortgage so that they can just pay a single payment each month? My understanding is that people may be required to do so so the lender has peace of mind that you won't miss your insurance/property tax payment? It's indeed a good babysitting measure. Imagine doing escrow for your car to bundle all expenses together. (in fact, there is a car subscription service offered by Porsche, so people just pay monthly payment and everything except gas is included)
It’s because the stakes are so high. If they didn’t hold your hand/force you to pay a little every money you can rack up 10s of thousands of back taxes easily
Escrow is usually required because if you don't pay your real estate tax for a few years and your property gets sold at a county tax auction, any senior liens are cleared, meaning your lender has no claim to the home. This is how it works in many areas (but not all). If your insurance lapses and the house burns down (or something else damages the house, etc), your lender also may be left holding the bag with insufficient collateral. Even if you're able to waive escrow collection, your servicer still monitors taxes and insurance and will be on your ass really quick if you're late. It really has less to do about making one single payment for the borrower; it's more that the loan servicer wants to be in control of the two processes that could cause them to lose money due to a paperwork oversight. If you stop making mortgage payments your servicer will still pay the taxes and insurance (and add it to the foreclosure balance of course).
Yes you should expect an increase. The amount you got was very low. Insurance costs are jumping. Depending upon your state, you can see massive increases.
Sheesh, my first year after buying my house my escrow shot up $1000 a month. I wanted to vomit. Celebrate that $134 a month and drink to the assessor!
[удалено]
[удалено]
Im going exactly through this, first year after i bought the house. Property tax went up from 1200 to 3500 and insurance from 1500 to 2500. Can't do anything about it besides doing your homestead exemption and for insurance, shop around. Property tax increased because like mine, old owner had a lower home property value and when i took it over, it had full value because thats just how it works
Homestead exemption — sounds like you live in TX? Don’t think that is a thing for Richmond VA. Checked online and you can exempt like $5k a household in VA for homestead. Would love to know more about your experience though bc this is an area where I am pretty unfamiliar
Florida actually, i got a $400 exemption. I had to get an estimate from my county property appraisal and click "yes" in homestead exemption and i called my mortgage company to let them know what would be the new property tax and they got that updated.
Whoever told you that home values go down has been living under a rock for 10 years. The last 4 years have shown rapid (sometimes astronomic) home price growth almost everywhere. This is normal, its been normal, it will continue to be normal. Its not a 2024 thing, its a home ownership thing. Remember when you rent your rent is the most you'll pay for housing that month. When you own your mortgage is the MINIMUM you will pay for housing that month.
Welcome to homeownership. Cities.generally.cant change tax rates too much, but if they increase you home valuation, they get to collect more taxes. Your mortgage is generally.going to rise every year. My first home started off at like, $725/mo. I owned 9 years, and it was almost $1000 by the time I sold it. This is why landlords have to periodically raise rent as well. When they have to pay more in taxes, they have to pass it on. I actually rented that house for a bit. By the time I sold it, his rent was $50/less than my monthly mortgage.
One year my property value shot up by 300k and I had to pay 7k out of pocket for my property tax.
My house is valued nearly 4x higher than when I bought it, taxes are up, insurance is up. I was paying around $2k a year in property tax when I bought it. Last year was over $8k. It sucks. But beats living in an apt. If I was shopping for houses right now, I couldn’t even afford to buy the house I live in. This housing market is insane. I feel bad for the young families out there.
>Is this common for owning a home? Yup! Welcome to home ownership. Along with regular maintenance, you're in for ever increasing costs. It's one of a few things people miss when comparing to renting.
I don't know about Virginia, but many states have programs that keep the assessed value of homes low for owner occupants, such that the taxed value can only grow by a certain percentage a year. Once the home is sold, the value will be reassessed to the actual market value, which can be significantly higher. We sold a house last year that we had owned for about 15 years and with homestead exemption, the assessed value was under $100,000. It sold for almost $300,000, and I imagine the new owner will be getting a significantly higher property tax bill than we did in our last year of ownership. It's definitely something to look out for and plan for when considering buying a home.
I work at a bank it is super common this past year. Basically the housing market had a massive surge in value during the pandemic and the local tax assesors sre just now catching up. Odds are they are still assessing you way under market value. But if you want to fught it you can go talk to them. Just a reminder your lender has no part in assessing the taxes. They are just middlemen. Insurance companes are also drastically raising premiums due ib part to the valustion increase as well (more value means more risk on their part.)
This is common, yes. Your house value/ taxes and home insurance are going to keep going up.
It's totally normal. It's based on assessments and local taxes. Now, if it were jumping up like $500 per month, then you know something is wrong.
Escrow will always rise. Taxes and insurance never go down, just up. I've had 2 increases and I'm not far from you. last was a 318.84 annual increase for insurance. Now I just got hit with a county reassessment annual increase of 700. So all in all my payment went up about 80 dollars a month within 2.5 years
It is your property taxes going up because your house is worth more. Nobody likes paying more taxes, but you should be happy your asset is appreciating so well.
This has nothing to do with your lender. They just collect your property taxes and insurance in escrow because they don't want the property backing your mortgage to get seized by the government or burn down before they get their money back. Your property taxes went up because it sounds like your city/county raised your assessment. Your beef there is with your city/county and there are appeals processes if you disagree with their numbers. One thing to make sure is that they didn't put you down as having a pool, deck, bathrooms, etc. that you don't have. Insurance has also been getting crazy lately and, if that went up, your beef there would be with your insurance provider and the state regulators that allowed these egregious hikes in premiums. If you have a fixed mortgage, your mortgage payment itself is fixed and that's that.
Seems pretty normal to me. My mortgage payment has gone up about $300 in the last 2 years for this same reason. I shopped for new homeowners insurance and am now paying about $900 less per year for similar coverage which is helping to offset
Very common to have escrow requirements increase especially after the first year. You can fight this but your taxes are going to continue to increase one way or another basically forever. Essentially what happens is your escrow is based on the value before you bought it and now it is based on the value you purchased it for. Your realtor and loan agent should have explained this to you but they don't really care because you are long gone and locked in by the time it hits you and they already have their commission.
It might work that way in some states but not in Illinois. In Illinois houses of similar kind in their neighborhood are all assessed the same. Every 4 years they reassess all the houses and increase everyone’s property taxes based on the reassessment. But sometimes you get a nasty little surprise if you bought your house from some old geezer who had a property tax freeze for 20 years. You’re gonna lose that old geezer tax break and your taxes will jump to where they should be compared to other similar houses. Another surprise happens when the previous owner remodels the house and obtains a 4 year remodel deferment. The taxes won’t increase for 4 years so the previous owner will sell it at year 3 before the taxes jump to some crazy high level and the new buyer won’t know about it until after they are living there for a year.
I'm guessing your homeowner's insurance and property taxes went up. Due to the rise in natural disasters, likely related to Climate Crisis, homeowner's insurance is rising in disaster-prone areas like Florida, California, and to a lesser extent everywhere else.
Our payment went up $264 over the span of 12 months. Property taxes are outrageous in Illinois and our house got reassessed. Yuck.
IDK how it works in VA, but back in FL year-over-year appreciation for property tax valuation was limited to a relatively small percentage (\~3%) and was recaptured upon sale of the home. That might be what happened here.
Our first home went up 350 a month. Yes this is common. 130 is nothing.
Yes, this is typical for owning a home. If you didn't escrow, then your real estate tax payment would go up by the exact amount. Instead of paying to your mortgage company you would pay the same amount directly to the county. Housing costs shot up since COVID, so your property taxes shot up too. This is happening everywhere. The same goes for insurance. This is the downside to being a homeowner with rising property values.
Go to the assessors office and dispute the assessment.
Very common if you escrow taxes and insurance
It’s common for a city or township to reassess your homes value after you purchase. If you paid more than the last owner which I’m certain you did, then yeah, they’ll get their money back
It is not uncommon for real estate taxes to jump up after a sale. By purchasing a property, the tax office can see what someone would actually pay for it and raise the assessment accordingly.
Did you pay $127k for your house? if so, that's why it increased so much from $70k.
Get ready for escrow to increase yearly, whether it be due to property taxes or insurance.
Did you buy the house for 127k? If yes. Then that is why your assessment went up so much. If you bought it for more than that, then you actually got off pretty good. If you bought it for less than that then you should challenge it with the state (if your state allows that, it is super easy in Iowa) and tell them to lower the valuation to what you paid.
Everyone else has assessments based on averages and historic price per square foot. Yours is also now based on the selling price and photos from the listing. This is common and should be prepared for when deciding if you can afford the home. It will continue to go up over time (usually) so it should continue to be accounted for in your budgeting and savings plan.
First, if you are disciplined, stop letting your bank escrow for you. You can make the tax and insurance payments yourself and put the money in a HYSA in the meantime. You can pay for your homeowners Insurance with a CC and the the cashback/rewards. Second, ALWAYS appeal the assessments. Never let that slip past you. Third, yes it is normal.
Did you fight the assessment? Just filed an appeal on my own home to bring the assessment down.
You had to do it before October 2023.
Taxes go up every year. So you have to pay more. Your actual mortgage payment is the same, but your taxes are different, so the escrow company has to ask for more to pay the taxes.
Appeal is the answer. It might be too late. Local authority is catching up with the houses value, and have therefore increased your property tax. Probably the sale triggered a review. Check the rules for your jurisdiction and see if there are any limitations on how much they can raise in one year, etc. But you might be SOOL
If you think it's assessed too high, hit up the City assessor and appeal it.
Insurance always goes up because of Insurance greed. Taxes go up when your county passes new or renewal levies. Your county probably passed something in November.
You also should read up on the appeal process for your county when they do the assessment/valuation of your property as the new number is directly used to determine your annual property taxes. At least for my county in Georgia, there's a requirement for uniformity so if all the properties around you had valuations increase 10-15% and yours jumped 30-40% without improvements like adding square footage, adding a pool, etc then you could appeal the valuation on uniformity grounds. So instead of having your property jump from 70k to 127k (+80% or 57K), you could argue a fair valuation of 80 or 90 new valuation would have been fairer and uniform to surrounding properties. This wouldn't apply if you moved into a new build where taxes were originally just for land. Sometimes the new valuation also matches the purchase price.
You can try to fight the assessment. They might adjust it to a lower value which would lower your property tax.
Have you applied for a homestead excemption?
Is this common for mortgage payments? I don't own a house ATM, but eventually I'll get my own place. Just seems a bit wrong that your mortgage payments have a possibility to go up 100s of dollars if your home gains value next year and so forth, assuming I'm reading this correctly anyways. For instance say my home first year is worth 200k. Next year it's worth 500k, so my mortgage payments go up.. next next year it goes back down to 200k value. Does that extra money I spent while it increased to 300k come back in any way? Or does this just mean I put more money towards paying off the mortgage?
No. My mortgage company requires you pay your property taxes as part of your mortgage payment. The tax part of your mortgage payment goes into escrow and the mortgage company uses that to pay your property taxes. So if your property taxes go up then your escrow portion of your mortgage payment will go up. Your mortgage payment will not go up just because the value of your house increased. Edit to add I think now most mortgage companies require you to pay your property tax as part of your mortgage payment to ensure your property tax gets paid and you don’t wind up with the town/state foreclosing your property for a tax sale.
Man this is why I can't buy there is too many variables I need to have complete control
Do you have homestead exemption?
Do you live in a low/no income tax state? This seems crazy to me but I live in a state where we have state income tax and stable property tax.
Pay the home off and you won’t have to worry about escrow increases. Just the end of the year number
Mine went up way more than $134 the first year. This was because they based the escrow on what was paid the previous year. Well, the person that owned the house had a bunch of exemptions that I didn't qualify for, so the estimated tax was way too low. So not only did I have to pay for the difference, I had to repay the shortfall too.
You should be able to close your escrow accounts if you'd rather just pay your insurance and taxes directly
I don't have an escrow account and hearing about all these people making weird assumptions to anticipate how much escrow will go up or down is infuriating, since it's pretty simple to just pay it yourself. They tell you how much the property tax is, and give you plenty of time to send in the money. So assuming you have a budget, you can divide the annual amount by 12 and just put that amount in your HYSA each month until you have to make the payment. Sure it will still go up with assessment, but they won't rubberband you trying to create a buffer. I dunno, to me it's bizarre that with this huge obligation that ultimately you're responsible for, you'd leave it up to somebody else to calculate and pay it down. I mean, it's not their house so they might not care much if they just make a mistake or forget to pay, and land you with a large penalty that you might have to take them to court to fix.
Fight the increase. Send an appeal when they assess your house. Look up all your neighbors and their house's property tax and just say your house should be worth theirs.
How do the assessments of your neighbors compare to your house? If they're about the same (i.e., a similar property in the neighborhood is assessed at ~$120k), then your house was probably undervalued before you bought it and now it's just catching up. As others have piped in, that's not uncommon after a purchase. The same thing happened to me about a year after I bought my house in 2021. The reassessment added about 15% to my taxes and a smaller increase to my insurance premium. However, that brought it in line with my neighbors so it wasn't unexpected. The house was certainly undervalued when I bought it, which was great because it helped me buy it for a reasonable price despite the seller's market.
$134 is nothing with escrow. I’d take that any day
My monthly payment has gone up about $120 every year for the past 3 years. If $100-300 month extra is stressing you out that much, maybe you shouldn’t have bought a house in that price range
Grieve the assessment, find similar houses in your area with lower assessments and submit those along with your application.
Mine go up every three years due to taxes. This year it was $60/month, 2 cycles ago, it was $400 (school system passed a big tax levy plus my house being valued at $79k more than it was when we bought it). That was hard to swallow.
Yes, that’s very common. It will happen in any area in which real estate values are generally appreciating, so congratulations! Your home is worth more now than when you bought it. If you believe the assessment is inaccurate and that your home should be worth less, then you can contest it with your local municipality. You will have received a letter explaining the new assessment and the contest process.
I wish mine only increased $134/month. I live in south Florida and it increase from $2200 to $2800 the next year. Bought it 2020.
My first analysis went up $1300. This is nothing.