Escrow shortage advice

Submitted by AlexoftheValar t3_11dkdct in personalfinance

Hello! I’m needing some advice in regards to my current financial situation

My husband and I just found out a week ago our mortgage has added on an escrow shortage in the amount of $7700, which has now doubled our mortgage payment from $1100 to $2250. Before knowing this, we bought a new car last month. When we signed the deal, we agreed to sign with the current rate and bank the dealership was offering and we would later refinance with our bank for a better rate. Since finding out about the escrow shortage we were thinking of going through our bank to take out a personal loan to pay off the shortage amount to lower our mortgage rate. My question is, if we take out a personal loan with our bank would that hurt our chances of refinancing our new car through them as well? Would we most likely get denied? My current credit score is 839 and my husbands is 784. I would appreciate any advice you all may have. Thank you!

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Annual_Fishing_9883 t1_ja963ih wrote

I wouldn’t take any loan to pay the shortage. That’s effectively a 0% interest loan that they giving you by spreading the payments out over 12 months.

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Levertki1 t1_ja96jnw wrote

Have you checked escrow shortage calculation? Something doesn’t seem correct. I get taxes have gone up and homeowners insurance has gone up, but by that much?

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AlexoftheValar OP t1_ja973wx wrote

Yes, we have checked. Our home is newly built so when they originally surveyed the area we were just paying “land taxes” due to the neighborhood not being completed and developed yet. That’s how the mortgage company explained it to me.

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theram4 t1_ja94p6t wrote

Every mortgage company I've ever had has allowed me to pay off the escrow shortage interest-free by increasing the payment each month over 12 months. Does yours not do this? Because it's definitely better to pay it off interest free than to take out a loan to do so.

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AlexoftheValar OP t1_ja958rc wrote

Yes I believe that’s what they did. They added the escrow shortage over 12 months making our new payment $2250 a month. The escrow shortage is an additional $600 a month on top of the mortgage, new taxes and new insurance rate

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sephiroth3650 t1_ja97ujy wrote

Sounds like you know your options (pay the new larger payment of new escrow+mortgage+shortage or come up with the $7700 shortage and pay the somewhat smaller new escrow+mortgage payment monthly).

If it were me, I wouldn't take out an interest bearing loan to pay off the shortage when they'll amortize the amount over the next 12 months interest free, unless you don't have the cashflow to cover that monthly payment. If that's the case, I'm not so sure you can comfortably afford to take out a personal loan to cover it, either. What does your total budget look like? Maybe the new car is the larger issue here? Also, is this a new construction, or have you otherwise verified that the $7700 shortage is accurate?

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ct-yankee t1_ja9ub7e wrote

Not a lot of income/budget info, so:

The increase in your escrow is an interest free loan. If I were in your shoes I would avoid stretching it out longer with a loan which would add interest.

In short, I'd look to cashflow it as much as I could with current savings and within my current budget.

The overall shift in mortgage payment from 1100 to 1650 (after you cashflow the shortage) is the longer term question.

If you don't budget, I'd start. It will answer a lot of questions about options down the road.

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lUNITl t1_ja954pc wrote

The best way to handle it would be to put extra cash on the shortage if possible to pay it down faster. If that’s not possible I would highly doubt the rate on an unsecured personal loan is significantly better than the rate at the dealer financing, so that would be a wash or have no effect.

Worst case the home payment goes back to normal in 6 months once the shortage is fulfilled.

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watches4life t1_jadpjbw wrote

I would rather pay that with the mortgage than take out a loan for it. The reality is that you’re going to have to make sure your escrow account will cover your taxes and I’m betting $1100 isn’t going to cover that.

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meltingpnt t1_jadqm7j wrote

You should also see if you can get the escrow account waived/removed

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Idyllic_Zemblanity t1_ja94j2z wrote

Can you combine the car and escrow shortage into one loan?

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AlexoftheValar OP t1_ja94sla wrote

Im not too sure we were planning on taking out a personal loan then an auto loan to refinance

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