Private Mortgage Insurance (PMI) Rates went up?

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I just got a bill from my escrow account for shortages in the amount of $ 630. That was quite a change from last year when we got a $ 700 rebate check for overages. I wish they’d just kept it! I called and asked why i owed so much to escrow AND may payment was increasing. They told me it was because the property taxes in my town increased and they didn’t anticipate that. Ok i said i understand and got off the phone. Is it normal for taxes to rise that much? And when i was looking over my statement, i saw (and decoded) the PMI increased by $ 130! from last year! Is that normal? i was looking online and some sites were saying that the PMI should not increase after closing on you house. Was it hidden in fine print somewhere, that they can increase? This is insurance for the bank if we ever defaulted on our loan, but can’t they see that driving up the rates on everything, can make a person default? So much for a “fixed-rate”!

  1. Reply
    November 10, 2011 at 12:00 pm

    Depends on your neighborhood, how much property taxes rise.

    I’ve never had PMI increase. I’d call and question that.

  2. Reply
    Margarita D
    November 10, 2011 at 12:00 pm

    As far as I am aware, I have never seen PMI increase. However, since PMI is insurance to provide a cushion for the bank in case of default and is based on the value of your home, it would be technically possible if your home value were to have a significant decrease, i.e. normally you are charged PMI if you paid less than 20% down so that the bank is only risking 80%. I seriously doubt that that is the case though. You say you “decoded” this information. I think what you are looking at is an increase to the escrow for taxes and insurance and the reserves or cushion the bank requires to be maintained for your escrow impound account.

    In terms of your tax increase, you would normally receive a notice of the increase from your local taxing authority (the county, city or state that imposes your property taxes). In my jurisdiction (and all the neighboring jurisdictions) we are sent notices of a proposed increase to the assessment which would generate the increased tax bill a year ahead and have only a specific window of time to file an appeal. If you miss the time for appeal, you are stuck with the increase. Unfortunately it sounds like it is too late to appeal your increase–you need to be on top of notices and copies of your tax bills that are sent by your jurisdiction.

    In the meantime though — ask your bank specifically what the taxes were last year and the insurance while you are at it and then ask them what they are this year and then do the math. Unfortunately the bank not only needs to make up the difference in your escrow they also need to increase to make sure there is not another shortage next year. However, the bank also usually includes a cushion and I have sometimes found that the cushion is to high. I have successfully argued with several banks to lower the escrow amount on behalf of clients when the cushion has been to high. And in my case I actually cancelled my escrow account years ago because of their funny math. I prefer to pay my own bills and not give the bank the use of my money.

    If you can manage setting aside the money to pay your own taxes and insurance and your bank will allow this, consider cancelling your escrow account. If you cannot do this, then you need to be more proactive with your property tax bills/assessment notices, etc. so you aren’t taken by surprise.

    I hope this information helps. Good Luck!

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