The Money Mustache Community
General Discussion => Share Your Badassity => Topic started by: cashmoney on April 24, 2017, 02:01:29 PM
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Hey everyone I just wanted to pass along a tip that puts some of your hard earned money back in your wallets.
When you buy a house, typically mortgage companies require that you provide 1 full year of prepaid home owners insurance on the house before the loan is approved. I've bought 3 houses and each time I had to prepay an entire year of home insurance. Then when you set up your mortgage payments you are factoring in monthly principal and interest, taxes, pmi and *monthly insurance payments*. So you are always a year a head on your home insurance.
If you're not already shopping your home insurance (and other insurance) then this might be the kick in the pants you need to do so. When you switch companies you should get a better rate AND a big-o refund of your prepaid home insurance from the former company. I just changed my home owner insurance provider and got almost $1,000 of my own money back within two weeks.
And the new company most likely will not require a year up front. You can pay as you go through your mortgage escrow.
Hope this helps someone.
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Awesome. Always a good idea to shop around for the best insurance deal.
We've gotten chunks of escrow money back when the bank over-estimated costs. Sure, it's our own money. But nice to have it in hand.
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The insurance company doesn't charge extra for monthly payments, does it, compared to paying in full up front?
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My insurance isn't escrowed anymore, but I'm not sure I'm following.
You pay X for the coming year, then pay X/12 into escrow for 12 months. When the mortgage company pays your insurance, you have X sitting in escrow to pay it. If it's not in in there, you're going to go negative or dip into money that's supposed to go toward property taxes.
Whenever I've switched insurance companies and insurance is escrowed, I've been told to send the refund check to my mortgage company.
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The insurance company doesn't charge extra for monthly payments, does it, compared to paying in full up front?
They might, I'm not sure honestly. I know typically there's a discount for paying in full but I've never had a mortgage without having the insurance premium and taxes all rolled into one monthly payment. I'll look into it.
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My insurance isn't escrowed anymore, but I'm not sure I'm following.
You pay X for the coming year, then pay X/12 into escrow for 12 months. When the mortgage company pays your insurance, you have X sitting in escrow to pay it. If it's not in in there, you're going to go negative or dip into money that's supposed to go toward property taxes.
Whenever I've switched insurance companies and insurance is escrowed, I've been told to send the refund check to my mortgage company.
Yeah, where we live, they typically require insurance to be paid up front and then say a 1/3 to a 1/2 of the next year's policy. I think this is because our insurance rates are crazy high and the mortgage companies always want to be several months ahead of mortgage payments. Getting a better rate would get you a reduced escrow payment and maybe a small refund, but it wouldn't be huge unless you were getting a really bad deal on insurance in the first place.
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In my scenario my monthly amount lowered (result of a better rate) and I got large refunds.