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Mortgage Going Up.....Blasted Taxes!!!

December 13th, 2006 at 07:40 am

I just got my year end mortgage statement, and because taxes in my town have gone up, yet again, the mortgage will be increasing by $61/month. Since we bought the house in 2004 the payment has increased by $100. GRRRRRR!!!!!!!!!!
If I want to pay the 'escrow cushion' of $167 it will lower the new mortgage payment by $13 or so....big deal.
The good news is that my principle balance went down by $3075, so the new balance is $197,378.84.
I have never made an additional principle payment on the mortgage, because I have always had too much other debt. But I wonder if it would be worth it to allocate some of the extra money (maybe $25 - $50) that I would have put toward the truck payment to the mortgage....what does everyone think?

8 Responses to “Mortgage Going Up.....Blasted Taxes!!!”

  1. mjrube94 Says:

    Have you looked into paying your property taxes and home insurance directly, rather than through your mortgage company? Depending on what type of mortgage you have, how much equity you have in your house, etc., your mortgage company may or may not let you, but it's worth asking.

    The reason it's better for you is this: your mortgage company is allowed by law to take an amount above and beyond your actual tax and insurance payment as a buffer to guard against them being short of funds, depending on the timing of the payments. Rather than them getting the interest on that money, you could instead.

    When I switched, I got that buffer back (about $1700, but my taxes are through the roof), and used it to start a new checking account, from which my taxes and insurance are paid. I direct deposit the appropriate amount of funds right into that account, which is separate from my other checking account, so I'm not tempted to touch it during tight months. Then, each quarter, I pay the tax bill out of there. In some cases, your town may allow you to pay by credit card, or auto draft from your account, which would make it easier on you.

    As for the extra $ toward principle each month, I guess it depends on what your mortgage rate is vs. your car rate. I'd put the extra toward whichever is higher...

    Good luck.

  2. fern Says:

    Depends on what your mortgage interest rate is.

  3. Ima saver Says:

    I would pay extra on your mortgage each month. You will save a ton of interest and pay it off earlier.

  4. janH Says:

    Since I read the thread about prepayment of auto loans not actually paying extra on the loan itself like I had thought I was doing, I've been thinking to reallocating the money, also. I'm going to add more to my mortgage payment instead. My auto loan is also a smidge lower in interest rate than my mortgage. Our insurance is out of sight, but understandable because of hurricanes. Add in flood and our insurances alone are four times our actual mortgage payment! I guess that is why I have the escrow still. I might not yet have the discipline to pay myself and miss something! But it is something I'm thinking about for the future....We also have fairly high taxes here that are due in January so I haven't decided if I have the discipline to take that over either because of the holiday spending. It is a goal!

  5. Lau Says:

    I agree with Ima here. If you want to see the result of your extra payment in the long run, I would suggest getting this template from the Microsoft website.
    When you open it, put in all your info in the top portion, and you can change the monthly payment amount under the "Scheduled Payment" column. Look at the "Total Interest" cell and see how much a few bucks more every month will impact your interest balance. It's astonishing!

  6. elgin526 Says:

    Right now I pay an extra $7 a month towards my principle. Not to pay it down faster, just to make my payment an even $1400 a month! Wink
    $25 or $50 a month wouldn't make a huge differance, I'd think. You may be better off puting that amount towards additional emergency fund savings, or save for something special like a vacation.

    As for taxes and escrow, I hear you. We haven't even gotten our tax bill yet from the county and my mortgage company wanted an extra $100 a month "just in case they go up". Since they likely will go up, the extra $100 a month probably isn't a bad idea, but still, you'd think they'd wait for the actual bill to come in first!

  7. frugalmomof1 Says:

    Thank you everyone for your advice. Lau...thank you very much for that template. I have heard that the earlier you start paying extra on the mortgage the more dramatic the savings is. If I started paying $25/month from the very first payment I would have saved just over $13k in interest over the life of the loan. That is a much greater savings in interest than the $300 that I would save by putting that same money toward the car payment.

  8. jersey jen Says:

    yeah, definitely toward mortgage principle, since it will go up in value, while cars only go down in value.

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