Financial Facts: Escrows: supervise your lender
Special to the Daily
As we all know there are two things that will happen on this big earth of ours, one being death and the other being taxes. And for all of you that own real estate already you know that taxes happen every year, death happens only once. So it would be wise to know about your property taxes, to whom do you pay, when do you pay and the same thing goes for homeowners insurance.
When you invest in real estate you own something of value and substance and with it comes certain expenses. As a property owner your land is in a taxing jurisdiction such as a town, county and state. Each of these entities tax you for their services such as police, fire, schools, water and even sewer services. The local county usually collects the taxes for all the various agencies receiving your money and then distributes the cash. The taxes are generally due in late January and are for the previous year.
Homeowner’s insurance premiums are based on the month you purchased your home. If you purchased your home in July you may be billed for six months of premium in January and July.
As a homeowner you have a choice of paying your insurance and real estate taxes directly to those agencies or you can escrow those fees and pay a portion each month, when you make your mortgage payment. If you escrow these costs you may pay approximately one 12th of the total each month. This allows the lender, the one who is collecting the cash to pay the bills when they come due. If you decide to pay the insurance and county on your own you may pay one or two lump sums, depending on the particular billing cycle of those agencies.
I have clients who are very good at keeping track of knowing when these bills are due and have the cash available to pay them. I also find that some homeowners may not have enough cash available to do so and an alternative option may be to pay them monthly included with your loan payment.
For all of you that escrow your taxes and insurance here is one step that is very important. You may want to check with your insurance agent and the county treasurer to ensure your lender is doing their job in paying these bills. I recently had a client who has been paying the escrows monthly and the lender was paying the taxes to the incorrect account with the county. After numerous telephone calls and additional due diligence we were able to get the lender to correct their mistake. So to avoid these potential problems take a little time out from your busy day and call your insurance agent and the county. A minute or two may save you hours when it comes time to sell or refinance your mortgage. Even though you escrow the taxes and insurance know that if the bills do not get paid by the lender, as they should, it may come back to haunt you and may cause you additional work.
Call Bob Kieber at (970) 453-4700 or email him at firstname.lastname@example.org. Bob is a local mortgage lender with Millennium Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, Equal Housing Lender. NMLS Bank #477710 Broker #289610. For tax benefit information please consult with a professional tax advisor. The opinions expressed are those of the individual, and do not necessarily reflect those of Millennium Bank.
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