Want a Lower Mortgage Payment? Just Ask!

June 11, 2009

By Nicole Mayer:

With property values dropping dramatically, property taxes are also falling, and that could be an opportunity for you to save money. Many homeowners are paying much more, often hundreds of dollars more, a month than they have to on their mortgage. If you want to lower your mortgage payment with little hassle, try looking into your escrow account.

When you pay your mortgage monthly, part of the payment goes to the principal and interest on the loan, while the other part goes into an escrow fund to cover your property taxes and insurance.

So, if your taxes have gone down, you may be able to pay less to your escrow account which lowers your monthly mortgage payment. Not only that, but you may actually have an escrow overage, which could entitle you to a handsome check, sometimes hundreds or even thousands of dollars.

Your mortgage servicer is only required by law to adjust your escrow payment every twelve months, beginning from the day you purchased the home.  But if you ask, you might find success getting a reduction early.

Some servicers are working with people to adjust escrow payments when a customer calls and requests what is known as an “escrow analysis.”  That’s basically a review of how much you are paying per month. The law allows servicers to conduct an escrow analysis upon request of the borrower.

Proof That It Can Work!

One homeowner, who works with Consumer Warning Network, followed this strategy and was able to reduce her mortgage payment by $250 a month AND get an escrow refund check sent to her in the amount of $2,200!

The borrower, who is a Bank of America customer, found out Bank of America was still calculating her mortgage payment based on her 2007 property taxes, which were much higher than her current taxes. Not only that, but the property appraiser’s office had also miscalculated the square footage on her home.  That miscalculation caused her to pay extra money in taxes.

Bank of America called the tax collector’s office on a conference call with the homeowner, got the information needed and immediately made the adjustments to her mortgage account.  All of these little mistakes can add up to big money for homeowners.

How to Lower Your Payment Step-by-Step

  1. Review your escrow account analysis, which can usually be obtained from your lender’s website or upon request to your servicer.
  2. Review the yearly tax amount listed on the escrow analysis.
  3. Call your county tax collector and ask how much was paid for your 2008 property taxes. Also, ask if they can provide an estimation of what your 2009 taxes will be. Many tax collectors have already released the 2009 property tax bills, which are often significantly lower than 2008 property taxes.
  4. Compare the tax amount your lender has listed in the escrow analysis and see if your lender is using  the the old real estate tax rate. If so, proceed to step five.
  5. Call your mortgage servicers, preferably the tax department, and explain that you believe they are using an incorrect amount to calculate your escrow analysis. Request that they perform an escrow analysis using the numbers you were given by the tax collector. Even if the lender is willing to do this, they will want to verify the figures with the tax collectors office. Bank of America’s tax department (which now owns Countrywide serviced loans) will likely call the tax collector with you on a conference call.

Don’t Give Up!

If you run into any hassles with your servicer, try explaining the following things

  • If your servicer doesn’t want to conduct an escrow analysis because it has not been 12 months since your last escrow analysis, advise them that you are more likely to be able to pay your mortgage if your payment goes down and an escrow adjustment will help with that;
  • Explain to your servicer that the law allows them to conduct an escrow analysis upon your request (Surprise! Even the servicers don’t understand the complex rules on this stuff, sometimes.)
  • Explain to your servicer that the law requires them to use the charge for your taxes in the next computation year if they know it.  You will help them know this amount by obtaining it from your county tax collector’s office and offering to have a conference call or get the documents in writing.
  • If the servicer claims there is no way to estimate what the 2009 property taxes will be then make sure they are at least using your 2008 property tax bill in your escrow analysis. We have seen some servicers still using 2007 taxes, which were MUCH higher;
  • If your servicer refuses to conduct an escrow analysis until 12 months from your last one and if it appears they are using the correct tax amount, then make sure to find out when the 12 month mark is so you can call and try again

Get Your Money!

If it turns out you have an escrow surplus over $50, then the servicer has to send that money to you within 30 days. Make sure they do! If you get an escrow payment adjustment, then make sure your future mortgage payments are adjusted properly.

Could you be eligible for a reduced mortgage payment? You’ll never know if you don’t ask.