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Bootstrap invoice for Mortgage

hey there matt the mortgage guy i'm creating a video today to talk about how escrow accounts work trust me when i tell you this is such a common question if it's a question you have and you're confused at all please rest assured tons and tons of people have this same question even when i explain it i'm trying to do my best to explain it the best way i know how it's it's a hard concept to kind of understand so if you've got questions about this hopefully the video helps if not please give me a call but this is how escrow accounts work now first and foremost an escrow account is basically a savings account held by the mortgage company to pay your property taxes your insurance and your mortgage insurance and when i say the first insurance i'm talking about hazard insurance homeowners insurance so the mortgage companies holding a bunch of your money with an escrow account and then twice a year they're paying taxes to the county once a year they're paying a one-year homeowners insurance bill to the homeowner's company state farm farmers somebody else and monthly a certain percent you know of this account is going towards your mortgage insurance if needed so here's a quick example a 400k purchase this one's not working too well all right so you're buying a house for hundred thousand you're putting uh 10 down so 360 k loan amount this stuff isn't as important but just so it's a real life example the way it's going to work is at close the mortgage company is going to collect a certain amount of reserves that might be five months of property taxes they're going to have you pay that whole homeowner's account in advance and later in the video i'll tell you why and why you're not double paying trust me you're never double paying but there's going to be a certain amount paid up front property taxes homeowners insurance and then there's going to be a few months more of reserves so they have reserves and there's a couple different reasons they do that but let's get into the example first okay so you're going to finance 360 at 2.99 on a 30-year loan that is going to make your principal interest payment 15 16 a month you've got five thousand dollars a year property taxes on this property that works out to 417 a month you've got 720 i'll put that up here 5 000 a year taxes 720 a year hazard which is homeowners insurance so that's 60 a month in hazard insurance and you've got good credit your mortgage insurance on this loan is 51 a month all together this is 2044. this is principle and interest these three are all escrows from an escrow account so the total of this is 528 a month now you send the mortgage company 2044. 900 of that goes towards interest 616 goes to paying down the the principal amount this amount 528 goes into an escrow account every single month on your statement you're going to see escrow balance 1732 escrow balance 23.56 and that's going to show up until you've got a disbursement and these 5 000 a year taxes twice a year they're going to ask for 2 500 bucks so let's say your escrow account three months from now has 3 700 in it they send 2 500 to property taxes now it's got 1200 i think i said 3 700 start and 528 a month keeps plopping back in 51 a month paid to mortgage insurance so it goes down by that amount but these 417 and 60 per month are basically collecting in the savings account that's yours and then they get paid they get dispersed to the county for taxes and to state farmer whoever's got your hazard insurance now here's where some confusion happens and and hopefully i'm not the best to explain this stuff but i'm gonna try i'm gonna give it a good college try people always ask me hey i see on my statement when i closed this loan when i bought the house i paid the next property tax installment i paid for 12 months of homeowners insurance and they asked me to pay three months of reserves i'm paid for 15 months i don't know anything why am i paying 60 a month i just paid them now here's what happens you close alone in june of 2020 your first payment's not due until august 1st so june 5th 2020 to 2021 that same date that one year that's paid you paid it through close now they also collect a couple months of of um reserves you know a little buffer so that let's say they collect two months they've got 120 in there your august 1st payment comes due 60 more september october november december january come next may early may they're going to say oh we've got a june 5th homeowners due let's disperse now this account is probably going to have 720 780 maybe 800 bucks they can't withhold too much they give they have a limit i'm just they can hold and then dispersed 720 to pay 2021 to 2022 and again it starts 60 bucks a month in this little escrow account collecting money for the next installment so that's how it works you're never double paying people ask me why am i paying 60 bucks a month i just paid them for a year you're paying 60 a month and it's collecting over the next year so when the next 2021 to 2022 is due the money will be there they're not going to want you the money you've got to put it in there every single month let that quote unquote savings account escrow account build then they disperse it so that's how that works any questions at all please feel free to reach out this is something that probably 99 of people do they use an escrow account with a lot of loans you can say hey i don't want to use an escrow account and depending on the lender with five percent down 10 down some lenders want more down they'll say you can wave escrows you can do this all on your own my personal opinion is i'm not sure you want to worry about paying property taxes twice a year paying homeowners insurance once a year writing those bills saving the money for those bigger bills because really some people's arguments i'm my money i want to hold on to it i want to collect interest on it one the interest rates for savings right now are absolute not good another thing is every year they'll do an escrow analysis and a lot of folks deal with this too they go what the heck is this my mortgage went up 56 or went down 21 what happened they do an analysis they can't hold more than a certain amount they can have a little bit in reserves so a little bit of buffer but they can't have an extra 2500 sitting this account so they analyze it and say hey you know based on our analysis we might not need 528 a month we only need 514 and you know it's because they had estimated property taxes to be 5 000 a year maybe it's 4 800 and something so they'll they'll take a look 514 for the next 12 months if we collect that are we going to have too much if we're going to have too much they'll send you a check here's 732 we've got too much we're going to adjust your mortgage payment down 14 so this total payment goes to 20 30 because we've only got to collect 514 going forward we're collecting too much or in the other case which unfortunately is more common they say you know what we didn't account for property taxes going up when you bought your house which they should this should all be set up but you know we've got mello roos or something your property taxes are six thousand dollars a year now this number goes up what they have to withhold goes up and if there's not enough in escrow count what they might have to do is one change it to start escrowing the right amount and two catch up for where they're behind we weren't collecting enough so we're going to collect this much going forward but to catch you up to where you should have been escrow count wise we're going to collect an extra 42 for the next 12 months something like that any questions on this i know it well and so i'm happy to answer any questions the servicer who's collecting payments usually should be able to answer those questions on why it changed but if you want a local professional's advice i'm happy to help with that as well any questions feel free to reach out matt matthewmoresguy.com shoot me an email there or give me a call or text at 916-529-7600 if you found value in this video and sorry it's a little bit long-winded please like subscribe the video i'm trying to put out as much good content on youtube as i can to where any and all questions that anybody ever has can be answered on a video format where i can help more people than calls i can take all right thanks again you