What you need to know about escrow
Do you have a mortgage with Homewise? If you have owned your home for at least a year, you should expect to receive your annual escrow statement from Homewise in the mail very soon. Your escrow statement includes information about changes to your mortgage account, so it’s important that you take the time to review and understand it. The statement contains a lot of information, and you may have questions about what it means and what actions you may need to take. In this section, we will show you how to read your escrow statement and answer some frequently asked questions along the way. You can watch the video below or keep reading to learn more.
Learn about your escrow
How to read your escrow statement and more with Nataly, Loan Servicing Advisor for Homewise
What is an escrow account, and why do I have one?
When you closed on your home loan, an escrow account was created to set aside money to pay your property taxes and homeowner’s insurance. The goal of your escrow account is to help make it more manageable for you to pay these expenses. Instead of paying these bills as one lump sum, your escrow account allows you to spread the cost of your taxes and insurance over the course of a year.
How does it work?
Each month when you make your mortgage payment to Homewise, it’s divided among four things: Principal, Interest, Property Taxes and Homeowner’s Insurance, or PITI. The taxes and insurance portion of your mortgage payment goes into your escrow account and Homewise, as your lender, uses that money to pay your property taxes and homeowner’s insurance bills when they become due.
What’s an annual escrow statement and why did I receive one?
The escrow statement is like a bank statement for your escrow account. It shows how much you put in, how much was paid out and when. Since property taxes and homeowner’s insurance costs can change from year to year, Homewise reviews your account once a year to make sure you have enough funds to pay these bills.
Reading your annual escrow statement.
Let’s review an annual escrow statement together. You should receive your statement in the mail from Homewise in January. If you have received your statement, take it out so you can follow along.
Payment Information: This is the first box at the top left of your statement. It is all about your mortgage payment. The first column titled “Current” includes your current mortgage payment total and the amount that goes toward your Principal and Interest and Escrow (Taxes and Insurance) each payment period. The next column titled “Effective Feb 01, 2021” will show your adjusted payment as of February 1st. It includes the Principal and Interest and Escrow (Taxes and Insurance) breakdown as well, and your new payment is included at the bottom.
Escrow Explanation: Right beneath the Payment Information box is the Escrow Explanation. This section shows what Homewise anticipated your taxes and insurances to be for 2020 and what they actually were for the year.
Shortage: On the second page, in the second paragraph, you can see more information about your shortage. A shortage means that you did not have enough money in your escrow account to cover your taxes and insurance for the year. The most common reason for a shortage and increase in your payments is an increase in your property taxes. As you own your home, it is likely that your property taxes and homeowner’s insurance will increase. If and when this happens, we will need to increase your monthly payment to make up for the shortage. You can either pay the shortage in one lump sum, or we can disperse the amount owed throughout the upcoming 12 months.
Paying the shortage: Located at the bottom right corner of the second page, this section will tell you what your new payment will be if you decide to pay the shortage up front.
So why is my mortgage payment changing?
With a fixed-rate mortgage loan, the interest rate will not change over the life of the loan, and therefore, the amount you pay each month toward your Principal and Interest will not change. But, as we mention above, your property taxes and homeowner’s insurance will likely increase over time which increases your mortgage payment. That is one of the main reasons you receive an escrow statement this time of year: to notify you of potential shortages in your escrow account. So, take note of the new tax and insurance prices and make sure that you are depositing enough money into your escrow account to pay the property tax and homeowner’s insurance bills when they become due next year.
So why does it look like I have more money in there than I need?
Homewise keeps a cushion of 2 months of your taxes and insurance in your account to ensure that you will always have enough money in that account to protect your home and your investment.
Will I always have a shortage? What if I have a surplus?
Not everyone has a shortage. There are customers who will have a surplus, and if the surplus is more than $50.00, Homewise will issue a refund by no later than March.
What do I need to do?
If you have a shortage and would like to pay it as a lump sum, you have a few options.
- Pay separately by check: You can mail or use our secure dropbox at our Siler Office location in Santa Fe to send a check payment for your shortage amount. Please make sure to include “Escrow Only” on the memo line, so we know that it is for your escrow shortage.
- Pay by check along with your mortgage payment: You can add the surplus payment to your normal payment if you typically make your payments by check. Please make sure to include a memo/note with the amount that is additional towards escrow shortage.
- Make an online payment: You can add it to your normal payment online under the Additional Escrow section. If you choose this option, please contact us to let us know so we can review your account and adjust your payment.
If you decide not to make the lump sum payment, our system will automatically opt you in to distributing the shortage amount over the 12 month period and your payment will increase.
Please note if you use a third-party service, like your bank’s automatic bill pay system to make your mortgage payments, you will need to update the payment amount yourself. If you are set up for automatic payments through Homewise, we will update the amount for you.
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