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+--- Thread: Mortgage escrow is short (/showthread.php?tid=67807)
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Mortgage escrow is short - prof - 12-08-2008
I received a letter from my mortage company that my escrow
is $900 below where it needs to be (Merry Christmas, me!)
They gave me the option of writing them a check for $900
now or they will spread it out over the next year and that will
cost me $100 more a month (such a swell company). I'm wondering
if I pay the $900 before the end of 2008, if that will benefit me at
all as far as my taxes. Will it show up on my year end statement
from the mortgage company and is it deductible?? Or does it just
not matter either way???
TIA,
prof
Re: Mortgage escrow is short - Black Landlord - 12-08-2008
This is normal. My letter said mine was over by $2 or so and it didn't make their threshold for a refund check.
If you are doing your taxes right, you are entering mortgage interest and property tax seperately and distinctly in your returns, so the way they pay you has no bearing on your taxes.
Re: Mortgage escrow is short - samintx - 12-08-2008
When I had a mortgage I got this type letter occasionally and as BL said it is legal. I never had one that enormous but it happens. Merry Christmas! ain't life grand?
Re: Mortgage escrow is short - STL - 12-08-2008
As I understand it your mortgage company wants $900 from you to cover your escrow shortfall.
An escrow account on a mortgage typically includes the cost of your home owners insurance and real estate taxes. Of the two usually only the real estate taxes are tax deductible. Note though that you can only take advantage of the tax deduction if you itemize deductions rather than taking the standard deduction.
Assuming itemizing deductions is the best way for you to file your return, paying the $900 now, soon enough to ensure the check is canceled by the end of 2008, results in that portion of the $900 that covers your shortfall in real estate taxes being tax deductible on your 2008 return.
Before you pay the $900 this year contact your mortgage company and get the breakdown of the $900 with respect to real estate taxes and homeowners insurance. If you decide to pay the $900 this year also ensure your mortgage company provides documentation as to the breakdown into real estate taxes and homeowners insurance for your tax records.
Re: Mortgage escrow is short - troywellbuilt - 12-08-2008
Your mortgage co. paid your taxes already. Paying this $900 now or later will have no effect on real estate taxes paid by you in 2008. This happens every year to me as my escrow review is right before my annual property tax increase, so I am always playing catch up. Interest free, so OK with me.
Re: Mortgage escrow is short - Mike Sellers - 12-08-2008
troywellbuilt wrote:
Your mortgage co. paid your taxes already. Paying this $900 now or later will have no effect on real estate taxes paid by you in 2008. This happens every year to me as my escrow review is right before my annual property tax increase, so I am always playing catch up. Interest free, so OK with me.
Yep, which is why there's no tax benefit to pay the $900 in one lump sum. Spread it out over the next nine months.
You may also have the option of eliminating the escrow portion of your house payment and paying the taxes/insurance yourself. This is beneficial if your escrow is generally overfunded because it would allow you to collect the interest on the money you save to pay these vs. your mortgage company collecting it.
Re: Mortgage escrow is short - TheCaber - 12-08-2008
prof wrote:
I received a letter from my mortage company that my escrow
is $900 below where it needs to be (Merry Christmas, me!)
They gave me the option of writing them a check for $900
now or they will spread it out over the next year and that will
cost me $100 more a month (such a swell company).
...
My simple math skills tell me that $100/mo for one year is $1200 total, or
$300 more than the $900 owed. Hmm. 33% 'interest' for a year is excessive.
I'd find a way to make up the shortfall now.
Re: Mortgage escrow is short - JoeH - 12-08-2008
The $300 is not interest paid to the mortgage company, it should under federal escrow rules go into the escrow account. But it should leave the account closer to even when the next property tax bills come along. As for what is deductible on taxes, only the amount actually paid out in a year on taxes is deductible. You can not claim it just because it was paid into the escrow account.
Re: Mortgage escrow is short - vicrock - 12-08-2008
Or, you could just not do the escrow at all and pay taxes and insurance yourself. That's what we do.
Re: Mortgage escrow is short - macphanatic - 12-08-2008
vicrock wrote:
Or, you could just not do the escrow at all and pay taxes and insurance yourself. That's what we do.
Not all mortage companies give you the option unless it's required by state law.