Payoff Escrow Shortage?

[Frank S.]

Received an annual escrow account disclosure statement for my home which I just purchased 7 months ago. Says there's a total escrow shortage of $446.18. I can either pay that amount in full or spread that amount over 12 months and pay an extra $37.18 on my monthly mortgage.

What should I do if my plan is to move from this home in 3-5 years? Thank you in advance for any insight!

[Christopher Phillips]

@Frank S.

It doesn't really matter if you plan on being there 3-5 more years.

The lenders use a tax service that researches the tax bill to make sure there's enough in the account. You're also paying insurance and PMI out of there.

If they project that the amount will be short for the full year, they notify the lender to collect extra escrow. Taxes are usually paid every 6 months or every 12 months depending on where you live. Looks like yours are paid in December to City and County... 

If you are putting in $37.18 extra every month, it builds up for 12 months before they actually pay the bill. So, this is really about anticipated future taxes. If you put the entire shortfall in there today, it will just sit there until the taxes are paid out. So, net effect, it doesn't really matter if you spread it out or pay all at once.

But, if you spread it out you'll have a few more dollars in your pocket each month.