It is easy to obtain an escrow refund if there is an overage in your account. Escrow accounts are set up at closing and held by your mortgage company to pay for property taxes and other expenses related to your home, like homeowner’s insurance and PMI. A portion of your monthly mortgage payment funds the escrow account. Due to Federal laws and mandates, lenders must refund the overage if you have a change in your tax liability or insurance expenses.
Determine if you’ve had a change in your tax liability or insurance expense. Your mortgage servicer must analyze your escrow balance at least once a year, but analysis is based on prior year’s payments from your escrow.
Acquire proper documentation. Your mortgage company will not conduct a new analysis based on verbal communication of your lower tax obligations. An incorrect calculation of your escrow requirements could result in a negative escrow balance.
Contact your mortgage company. Since mortgage companies perform escrow analysis annually, it could take several months to get a refund. However, notifying your lender and requesting a new analysis will expedite your refund.
Ask your lender to provide a due date for the completion of the new analysis and follow up with your lender if they have not met the deadline. Request the name and number of the customer service representative you are dealing with. This will aid you and the lender, should your analysis lag behind the stated due date. Be prepared to wait, it can take weeks to obtain a new analysis and a refund.
When providing documentation for your new escrow analysis, send a detailed letter, even if lender does not ask you to do so. The representative you talk to is rarely the representative that is performing the new analysis and you can explain your unique situation better than a third party. Sending an explanation will help prevent the need for follow up communication that will delay your refund.
If you’ve had changes to your property tax liability or insurance premium over the last few months, you should request a new analysis to obtain an escrow refund. Examples of changes include: lower tax rates from your taxing authority, new property tax exemptions, decreases in your tax assessment and changes in insurance agent resulting in lower premiums.
Your lender will require proof of your claims to ensure accurate estimates that will save you from higher mortgage payments, penalties and fees. Examples of documentation are letters from your tax assessor communicating changes in tax liability, recent tax bills and new insurance policies.
Take the time to audit your mortgage company’s new escrow calculation. Escrow analysis is usually based on prior year’s tax payments, not future estimates. This nuance often leads to errors in the new calculation. Improperly calculated escrow balances could lead to serious problems later.
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