Mortgages

Buying a house is probably the biggest purchase you’re going to make. If you’re going to buy a home soon, taking the time to get a financial plan in order can be a huge step in helping you reach your goal. It can also provide you a way to make home ownership a relatively enjoyable experience.

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It looks like one of our bills will be increasing starting this month. Imagine the joy on our faces when we got an update from Wells Fargo about our mortgage payments for the next year. It looks like we’re having an increase. Having a fixed rate mortgage doesn’t necessarily mean that our payments to Wells Fargo remain the same through out the loan. Why? Besides sending in the mortgage payment, we’re also sending in money to escrow.

What is Escrow? How Does It Work?

When you get a mortgage, if your down payment is less than 20% your lender will typically have you open an escrow account to handle your property taxes and homeowner’s insurance. This amount is estimated and then broken down into monthly payments, added to your mortgage payments. In addition to those bills, our escrow also takes care of our mortgage insurance premium (MIP) that we owe as we got an FHA loan on the house. Instead of cutting checks to several places, Wells Fargo makes these payments on our behalf as they are due.

The disadvantage of not doing this ourselves is that we don’t earn any interest on the money as it’s being saved. However looking at the balance it’s not really a huge deal. Perhaps down the line, we may want to take care of those bills ourselves and get a small bump in our savings. For now, though, Wells Fargo is handling it.

Looking at Our Payment Options

After reviewing the changes, I noticed that the increase is due to a slight increase in our property tax bill and the new premiums for our home insurance. As you may remember, we were reevaluating our home insurance coverage to make sure we were getting a good deal and found that we were under-insured for our house should a fire happen. The insurance wouldn’t be enough to cover the interior rebuild.

The total increase for our escrow account portion would be around 12%.   Wells Fargo is giving us two options:

  • Pay the shortage now and our mortgage payment goes up.
  • Spread the additional payments out through the year. 

So either way, our mortgage increases. To keep our cash flow steady we went with the latter option and I already adjusted our bill pay service to the new amount.

Thoughts on Mortgage Payments

I’d like to hear from you about how your mortgage payments are going? How frequently have your payments changed through the years? How big or small are the changes?

Get Your Money Right Before Buying a House

by Elle Martinez
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Today’s post is based on a response to a comment I made on another personal finance blog. With The Debt Movement in full swing (sign up for a chance to win money to pay off some of your debts), I’ve been stopping by and checking out the site to get motivated and inspired by the debt […]

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Are Bi-Weekly Payment Programs a Good Option?

by guest poster
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By Tali Wee of Zillow Paying off a mortgage can be overwhelming for homeowners. Many options and recommendations exist for homeowners who want to pay their principal faster than the terms of their loan in order to save money on interest. Although savings are desirable, paying more than the mortgage payment isn’t feasible for all homeowners. […]

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Mortgage Payoff Progress for 2012

by Elle Martinez
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It’s the end year, so I’m reviewing a bit of financial progress we’ve made. Today I want to look at our mortgage on our home. Like our monthly net worth reviews, we looking over the numbers to what we’ve done to see what worked and what didn’t. This system has worked well for us as […]

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Refinancing Your Mortgage Can Still Be a Great Option

by Elle Martinez
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One of my favorite things about writing here on Couple Money is receiving email from you. Whether it’s questions or stories, I love hearing your thoughts on finances. Refinancing His Mortgage 3x in 3 Years This week I received an email from a reader who has successfully refinanced their mortgage a few times, saving money and time as they’ve […]

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Small Joys: An Update on Paying Down the Mortgage

by Elle Martinez
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With the low interest rates out there (still!)I’ve been checking to see if getting a refinance makes sense for us. We tried to refinance earlier this year, but the overall costs didn’t work out for us. One of the lenders I checked out was our current one as they offer a streamline refinance. I discover […]

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Refinancing Our House- An Update

by Elle Martinez
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It’s been a bit since I mentioned refinancing our mortgage. We hadn’t dropped the idea – it’s just that there hasn’t been much changed. We haven’t heard anything from the mortgage specialist. Earlier this month we decided to see if the streamlined refinance option our current lender offers would be a good deal for us. […]

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