New home tax question

[Aaron]

Just bought our first house on May 14th. We were instructed to pay extra tax into an escrow account for when our tax rate goes to the higher, land and house rate.

 

My question:

 

So if we are paying our full tax bill from day one, yet there are months that we will not be taxed at the land and house rate (higher), were is the additional money going? We will accrue a surplus of money that will just be sitting there, correct? And if we continue to pay our taxes in full each month after our normal land and house rate goes into affect, will they write us a check for the amount in escrow? Lower our monthly payment over the next year etc?

 

I understand the idea of the tax escrow is to prevent people from being surprised by a large tax bill for back taxes the first year, but I feel I am missing a vital piece of info to make this clear.

 

Aaron

[LJ]

Just bought our first house on May 14th. We were instructed to pay extra tax into an escrow account for when our tax rate goes to the higher, land and house rate.

 

My question:

 

So if we are paying our full tax bill from day one, yet there are months that we will not be taxed at the land and house rate (higher), were is the additional money going? We will accrue a surplus of money that will just be sitting there, correct? And if we continue to pay our taxes in full each month after our normal land and house rate goes into affect, will they write us a check for the amount in escrow? Lower our monthly payment over the next year etc?

 

I understand the idea of the tax escrow is to prevent people from being surprised by a large tax bill for back taxes the first year, but I feel I am missing a vital piece of info to make this clear.

 

Aaron

 

They will send you a check or roll it over

[craig71188]

Just bought our first house on May 14th. We were instructed to pay extra tax into an escrow account for when our tax rate goes to the higher, land and house rate.

 

My question:

 

So if we are paying our full tax bill from day one, yet there are months that we will not be taxed at the land and house rate (higher), were is the additional money going? We will accrue a surplus of money that will just be sitting there, correct? And if we continue to pay our taxes in full each month after our normal land and house rate goes into affect, will they write us a check for the amount in escrow? Lower our monthly payment over the next year etc?

 

I understand the idea of the tax escrow is to prevent people from being surprised by a large tax bill for back taxes the first year, but I feel I am missing a vital piece of info to make this clear.

 

Aaron

 

The mortgage company will "estimate" the new tax increase and come up with your monthly number for escrow. At the end of the year after taxes are paid they will recalculate your monthly escrow amount for the next year and advise you of your new payment. Typically any "overage" will be divided by 12 and your payment (escrow portion) will be adjusted downward accordingly. If there is a shortage (not likely-they usually pad the number up so they don't use their money) - they would divide the shortage by 12 and add it to the escrow portion of you payment the following year.

As taxes change, your payment gets adjusted annually to reflect the amount of escrow needed to cover them (same with insurance if you escrow that payment)

[87GT]

Ya they will refund it or it will sit in your escrow account balance. My online payment system lets me choose to pay extra amount toward the principle if I have a positive account balance.