Monthly mortgage payment questions - Hazard Insurance and County Taxes

[Jeff L.]

My lender sent me the itemized monthly mortgage payments I'll be making. Along with the principle and interest are two items I had questions about:

1) Hazard Insurance - does this go away once I'm covered by my own landlord insurance policy? Do I have to have this?

2) County Taxes - A monthly payment for this included in the mortgage. Does the lender pay the property taxes for me from what I pay them? I'm confused about this item.

[Jon Holdman]

No, those won't go away.  The lender will make the payments to your property insurance company and the county for the taxes.  These amounts you're seeing are the escrow amounts.  You pay these each month and the lender makes these payments as they come due.  More correctly, the loan servicer does this.  They're they ones you send your payments to.  They make these tax and insurance payments as well as sending money to the actual lender.

Once a year they will do an "escrow analysis" and recalculate the escrow amount.  That typically goes up a bit each year as the taxes and insurance go up.  Early in the loan, though, these can go up or down a bunch.  That's because they almost always get this wrong when the loan is originated and it takes a few years of adjustments to stablize them.

When they do that analysis, they may want an immediate payment of a shortage, may send you a check if there's an overage, or they may adjust your payment.  Or some combination.