Transcript: Cale (00:00)
Hey, what's going on, guys? Cale Myrick here with Waters Edge Realty. Look, I know we like to get online and talk about all the wonderful aspects and the wonderful benefits of moving into a very desired living area. But today I want to talk to you about something that's negative, or possibly a negative about moving into an area that's developing quickly, that everybody wants to be in. So this has personally happened to me since 2020 when I bought my first home.
When I bought my first home, my mortgage, it was $1,045 a month or something like that. That same mortgage right now is over one $200 a month. And I got a fixed 30 year rate. You may say, how can your mortgage payment increase with a fixed rate? Well, let me tell you about not only taxes, but insurance.
So insurance should be a fixed cost going into the year. You should know exactly what to expect going into the next upcoming year. Taxes, however, are paid in Alabama, at least in what are called arrears, which means you basically set forth in escrow an estimated tax payment amount every month for your mortgage, and then you get your tax bill at the end of the year for that previous year. So you basically pay an estimated tax. And if that is too short in your account, meaning if you did not have enough money to cover the actual tax bill, your mortgage payment can go up the next year.
They'll take the total you're short by and they'll divide it into twelve months, one for every month of the upcoming year, and your mortgage payment will actually increase. Now, to keep your mortgage payment from increasing, you can pay that escrow shortage all at once. For example, our tax payment from last year was short about $500. So I could pay $500 out of pocket, or I could take that $500, divide it by twelve payments and pay that extra on the mortgage next year to catch up escrow account.