Create a Billing Statement of Account Sample for Mortgage Effortlessly

Billing statement of account sample for Mortgage

I wanted to do a video on escrow accounts for property taxes and homeowners insurance and explain this in advance of closing to help clarify things first let's take homeowners insurance as you can see this form is a closing disclosure I'm focused on this is the second page under other costs category f for prepaids category G for the initial escrow payment looking at homeowners insurance on this particular closing they're taking 12 months under f for prepaids and then under G they're taking under 01 they're taking another three months for 15 months total that seems excessive here's where that 15 months comes from this particular closing is closing on June 21st 2023 so their homeowners insurance is going to roll over every June 21st your first payment on the mortgage in this instance won't be due until August 1st why because a mortgage is paid in arrears it's paid backwards so August 1 mortgage payment due date is actually for July you can see here they're collecting interest from June 21 to July 1 so August 1 starts the full mortgage payments for July September 1 for August and so on since you're not making a full mortgage payment to the new lender until August 1st by the time June of next year rolls around you will have only made 10 payments so to pay the second year bill from June 21 2024 to June 21 2025 you'll be short two months you'll have made 10 payments to the lender you'll be short two months so there's the three so 12 you're paying for the first year in advance from June 21 2023 to June 21 2024 the three covers two months of the shortage for the next bill June 21 2024 to June 21 2025. however wait that's only 14 months why are we collecting 15. so you're collecting uh you're paying one extra month as a pad or a cushion because over time your insurance bills will go up as the property value goes up so they take a small pad up front at closing so out of 15 months 12 months is to pay the first year in advance two months is to pay the shortage to have a complete 12 months on the second year installment and then there's a one month pad this is the same concept for property taxes now this particular property happens to be in Washington DC property taxes are due in Washington D.C October and then again in March so if we're going to closing in June and you've got a first payment due August 1 by the time the next tax bill comes due October of this year you will have made an August payment September and then October 1 a six-month tax bill is due in the district because the Washington DC the taxes are due bi-annually well if you've only paid three months worth will be short three and we're going to be collecting for the next month's bill and the pad so same concept you can see here they're collecting nothing under prepaids zero months under g03 they're collecting six months so six months in advance goes for the three months we're going to be short on the October tax bill it's a six-month Bill we will have only collected three they collect another couple of months towards the next bill and then they collect a pad so you're always ahead of the curve on your tax and insurance bills so at some point whenever you sell the property you do a refund depending on where you are in the tax cycle and the insurance billing cycle you'll be due a refund of a certain amount of unused property taxes sitting in escrow and a certain amount of unused homeowners insurance sitting in escrow the last thing to explain a lot of people ask what's this aggregate adjustment negative 450 I can tell you the textbook definition is an aggregate adjustment is a credit to the buyer for an amount that is in excess of what's allowed to be collected at closing this credit simply reduces the amount collected for the escrow account and is a line item on the CD what they're saying in English is if the lender is collecting too much up here they make a credit down here to bring it in line with what's legally allowed to be collected now logic would indicate well why they don't why don't they just collect a little less up here and not you know debit and then credit for whatever reason for some accounting reason they collect what they think they need to collect up here there's some formula that someone goes through and then there's sometimes an aggregate adjustment or a credit to you to even this out because it goes a little bit overboard which in this case I think might have been for the property taxes anyway that's an explanation of why the amounts collected at closing for escrows for homeowners insurance and property taxes are collected I hope that makes sense please let me know if you have any questions