Question about escrow in FL...

[RandomEvent]

I found out a family friend's house payment just jumped up about $500 since August. It looks like the taxes are what bumped it up so much. After research, what I found out is that 2007 escrow was too low, so now a lot of folks are going to be paying higher payments to make up for it in 2008.

I'm wondering if anyone can shed more light on this for me, and maybe give advice on lowering the payments. If possible. Which it probably isn't.

 

[fdeck]

You could think of Escrow as a sort of savings account to set aside the money that you will owe in taxes and insurance. These are things that have to be paid in order to protect the mortgage company's investment. There are laws that govern how much they can take.

The only way to avoid Escrow is to pay those bills yourself with money that you hopefully set aside for that purpose. Usually, killing the escrow account requires you to have a certain amount of principal paid off. The idea is that if enough of your own money is at risk in the mortgage, then you will pay your taxes & insurance to protect your own investment.

That's how it is supposed to work. Amusingly, my first mortgage involved escrow, and roughly every year, I got a check in the mail for a few dollars due to some class action suit filed against my escrow company. From that I assume it is possible for the escrow company to do goofy things with your money, but hopefully it is not a common occurrence.