Unsupervised little green workers - my bad

[RetiredAt63]

This is my shame.

Due to the way my mortgage is set up, my bank pays my municipal taxes.  I was online banking this weekend and realized that in a click-down menu I could see how the tax account is doing, since municipal taxes are about to come out.  Oops!  My first year in the house the account didn't have enough for taxes (only 4 months worth of contributions), so they bumped the mortgage payment up a bit to fully cover the taxes.  The bank never readjusted back down once the account was up to speed, and I have been paying almost $1500 too much each year.

That is being fixed, and the excess will go straight to principal, but think of all the years that money was earning some incredibly tiny rate of interest, instead of saving me mortgage interest.  However, since I know I am fine with the payment each month, I will keep that payment and make sure the excess is gong to principal.

Ouch.

[ohana]

A good lesson.  I always assume money-type people (payroll, bankers, etc) will just have it taken care of, despite repeated evidence to the contrary.  Good job catching, and congrats on the extra money going towards your principal.

[redcedar]

Doesn't Canadian finance laws have something that covers this? In the US, any mortgage service company or similar that manages your escrow account has a fairly strict set of formulas that they must follow. The formulas protect the servicer and the borrrower. The servicer is protected from the escrow account getting too low. The borrower is protected from the account getting to high.

Now their is some slack or padding built in and the servicer definitely benefits from the interest earned on the tons of padding they accumulate from their book of business.

[RetiredAt63]

No idea about regs, and I suppose the amount of padding depends on the area - my taxes are about $2600/year, but depending on the local municipality and house they can be a lot higher.  The thing is, this is 5 years worth of overpay so it looks worse.

What kills me is this is money left on the table back when I was going deeper into debt with the separation and legal fees, and I could have used that money.  Now it will go to the mortgage, which is nice, but not the super happy making event that having that money would have been 5 years ago.

And to give my bank credit, I think this just went under everyone's radar - a temporary adjustment never got readjusted when it wasn't needed. When I emailed my personal contact at my branch this morning, her immediate reaction was "Wow, got to get that adjusted, and the overage deposited in your account."

Doesn't Canadian finance laws have something that covers this? In the US, any mortgage service company or similar that manages your escrow account has a fairly strict set of formulas that they must follow. The formulas protect the servicer and the borrrower. The servicer is protected from the escrow account getting too low. The borrower is protected from the account getting to high.

Now their is some slack or padding built in and the servicer definitely benefits from the interest earned on the tons of padding they accumulate from their book of business.

[With This Herring]

In the US, your escrow account should be reviewed yearly by your banker.

Perhaps you should talk to someone high up at your bank and see if the excess can be applied to the mortgage retroactively.  That would also end up converting some prior interest payments to principal payments and help your mortgage balance even more.

[RetiredAt63]

Good idea.  Thanks.

Perhaps you should talk to someone high up at your bank and see if the excess can be applied to the mortgage retroactively.  That would also end up converting some prior interest payments to principal payments and help your mortgage balance even more.

[Jack]

And to give my bank credit, I think this just went under everyone's radar - a temporary adjustment never got readjusted when it wasn't needed. When I emailed my personal contact at my branch this morning, her immediate reaction was "Wow, got to get that adjusted, and the overage deposited in your account."

It's the bank's job to adjust it! I mean, that's literally what an escrow account is for, and what the person managing it is being paid to do. If that manager lets something like that slip under his radar, that's called "being incompetent."

(Unless you had some kind of obligation to notify them of the change yourself... then it'd be your fault.)

[RetiredAt63]

It's the bank's job to adjust it! I mean, that's literally what an escrow account is for, and what the person managing it is being paid to do. If that manager lets something like that slip under his radar, that's called "being incompetent."

(Unless you had some kind of obligation to notify them of the change yourself... then it'd be your fault.)

I had no obligation, it was their adjustment - I could have given them the money they were short for taxes and left the monthly pay the same, I wasn't offered the choice.

I've already emailed them re With This Herring's suggestion about retroactive principle payments, we shall see what happens.

Takeaway lesson - check everything, not just the obvious.