I’ve received calls from two different clients over the past two weeks. Each was about the same thing; they’d received a notice from their mortgage company notifying them of a deficit in their escrow account. They had the option of paying the escrow shortage or it could be factored into their already increased monthly home mortgage payment. Sheri and I also received the same notice a few weeks earlier. Since I’m our insurance agent, Sheri asked me the same question that my clients asked; what happened and caused this?
There are three factors that contribute to anyone experiencing a shortfall in their escrow account:
- An increase in the home insurance premium
- An increase in the property taxes
- Both could have increased.
Texas home insurance rates have been increasing consistently for the past 4 years. Insurance companies have reported average premium increases of 5% to 20% statewide in the last 12 months. Rates across north Texas have gone beyond that with some of the carriers, and a very few have raised the wind / hail deductible to either 1.5% or 2%.
The Dallas Morning News reported on Saturday, May 17, that Dallas County property taxes have risen by 7% over last year’s tax rates and this is on top of a 4.3% increase in 2013. Property taxes are increasing due to a number of factors; growth in the economy, an increase in the overall purchase price of homes, and catching up from three years of 1.7% increases from 2009 to 2011. Collin County’s tax property tax rate increased by 7% on average and similar increases are expected for Denton and Tarrant Counties.
Add these two increases together and it’s no wonder people are receiving notices from their mortgage companies stating that there is a shortage of funds in their escrow accounts resulting in rising monthly home mortgage payments. There are a couple of actions we recommend when this happens:
- Review your home insurance with your agent
- Contest your property tax increase
In the case of my clients, we are actively reviewing their home insurance rates. If we’re able to provide savings by moving them to another insurance company we discuss that with the homeowner and do that. If it doesn’t make sense to move the policy because there is no lower cost option for them, we review the coverage to see if there are options which should be removed.
When it doesn’t make sense to remove coverage we recommend staying put to see what happens with home insurance rates in the coming year and suggest they evaluate contesting their property tax increase. Dallas County residents can file a protest online, in writing, or in person. To file an online property tax challenge go to www.dallascad.org. If the appraisal district agrees with you, you’ll receive an email notifying you of that. If they disagree, then you’ll have the option of scheduling a review board hearing. All protests must be filed by June 2 of this year.
What do you think? Share your thoughts, suggestions, questions, and experiences with us in the comments section of our blog or on our Facebook and Google + pages. I’d love to hear from you!