Cancelled homeowner’s policy refund question

you got a big refund because of a difference in policy price or was the check sent to you the old policy amount? if so you may need to mail them a check for the amount of the new policy to be put into escrow. sounds like thats what they're asking for

I'm going to assume that your mortgage company paid the old policy, then you switched to a new insurance company and the mortgage company also paid the new policy...right?

So your mortgage company paid insurance twice and now you're trying to hang onto the refund money while you're escrow account is significantly in the negative?

I don't know if they have any recourse besides adjusting your monthly payment to recoup it, but they're not just adding it to the loan balance. They will always try to recoup escrow shortfalls in 12 months or less (possibly much sooner with what you're trying to pull). So get ready for your mortgage to go up by a few hundred a month until they makeup the shortage.

Gotcha. So it won’t just be adding to the whole mortgage all at just 3%.

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So it won’t just be adding to the whole mortgage all at just 3%.

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No. They gave you a loan for the house, not for the insurance. Everything that comes out of your escrow is supposed to be pre-paid. Property tax, homeowners insurance, flood insurance (if required)...all pre-paid. So they will try to recoup an escrow shortage in a shorter period of time.

You pay the first year as part of your closing costs. Then going forward, a portion of your regular monthly payment is for escrow and set aside to pay insurance and property taxes. If insurance and/or taxes go up year over year, your escrow will be short. Mortgage company still pays it but they adjust your note going forward. They don't add the shortage to the backend of the loan. You're just going to have a much bigger escrow shortage if you don't send that refund money back to the mortgage company.

Simple answer:

Call your mortgage company and ask.

I had the same thing with two rental policies. They raised the monthly, but lowered after sending the refund checks.

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You will likely just pay more next year towards catching up the shortage in your escrow account.

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This ^^^^

If you require a set budget and don't like bills fluctuating, send them the refund.

If you don't mind the escrow rollercoaster (under pay now, more than overpay next year, under pay 2 years from now), then just keep the cash.

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But all the overpaying is still at 3% interest right?

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your interest rate and principal loaned has nothing to do with your escrow set up.