Frequently Asked Questions about Escrow
Frequently Asked Questions
What is escrow?
Escrow is an account that holds money you deposit to be used for future property tax and homeowners insurance payments. When you make your Oklahoma Central Credit Union mortgage loan payment, part of the payment goes toward the principal and part to interest. An additional amount goes into escrow. When the property taxes, homeowners insurance and flood insurance (if applicable) are due, Oklahoma Central Credit Union will use the money held in your escrow account to pay those bills on your behalf.
Why do I have to make escrow payments?
Escrow is required in order to get most mortgage loans. Escrow works to your benefit in a couple of ways. First, it breaks down the cost of taxes and insurance into monthly payments. This may be easier on your budget than facing large insurance or tax bills once or twice a year. In addition, Oklahoma Central Credit Union will make your tax and insurance payments for you. You don’t need to keep track of when those payments are due.
How is escrow calculated?
When you take out a mortgage loan, Oklahoma Central Credit Union estimates the annual cost of your property taxes and homeowners insurance. We then divide the total by 12 monthly payments. This amount is added to your principal and interest payments to determine your total monthly payment.
Can the amount of my escrow payment change?
Yes. For example, if your property value increases, your property tax may increase as well. Or, your homeowners insurance rate may go up or down. These changes may affect the amount that must be deposited into escrow. Your total monthly mortgage payment could increase or decrease, even if you have a fixed-rate mortgage.
How often can escrow amounts change?
Your escrow amount can change once a year, based on our analysis of past payments and expected future payments.
How will I know how much I’ve paid into escrow?
Each year, Oklahoma Central Credit Union will provide you with an Annual Escrow Account Disclosure Statement. The statement estimates your escrow payments for the coming year and shows your actual escrow payments for the previous year. It will also show if you have a surplus (overpayment) or shortage (underpayment).
What happens if I overpaid into escrow?
If your taxes and/or insurance payments are less than originally estimated, your Annual Escrow Account Disclosure Statement will show the surplus (the amount you overpaid). Your monthly payment for the coming year may be lower than the previous year’s. Your new monthly payment will appear on the statement.
Why did I get an escrow refund?
If your Annual Escrow Account Disclosure Statement shows a surplus, that amount is usually refunded to you. If the amount is under $50, the credit union may not refund the surplus and simply apply it toward future escrow.
What do I do with my escrow refund?
Your escrow refund is the result of an overpayment and therefore yours to save or spend as you please. Since it is a refund of something you paid, it is not considered taxable income.
What happens if I underpaid into escrow?
If your taxes and/or insurance payments are more than originally estimated, your Annual Escrow Account Disclosure Statement will show the shortage amount. Typically, the shortage amount will be divided into 12 equal amounts that will be added to your monthly Escrow payment for the coming year. Therefore, your total monthly mortgage loan payment for the coming year will be higher. Your new monthly payment will appear on the statement.
If I pay my escrow shortage, will my mortgage payments still go up?
The escrow payments on your mortgage are analyzed each year and estimated for the coming year, so your total monthly payment will be based on your principal, interest and anticipated tax and insurance costs. Therefore, your mortgage payments may still go up.
Can I pay additional monies to my escrow account throughout the year? If so, will my payment still go up?
You can make an escrow-only payment at any time. It may not keep your payment from rising, since homeowners insurance and taxes could still increase. However, it may help if there is likely to be a shortage in the account.
Can I get rid of escrow and pay taxes and insurance on my own?
There are only two ways to eliminate escrow: 1) pay off the mortgage loan, or 2) refinance without escrow. There are minimum requirements to meet in order to refinance a mortgage loan without escrow. In addition, if you don’t have an escrow account you will have to pay your homeowners insurance and property tax bills on your own in a timely manner. Failing to do so could result in tax penalties or cancellation of insurance.
How can I keep my property taxes from going up?
Homeowners don’t have much control over their property tax rate, which is determined by their city, municipality, county and state. Your home value may go up if you’ve made improvements, such as adding a bathroom or remodeling, which can affect your taxes. Also, it’s not just your property that impacts your property tax rate. If homes in your neighborhood are selling for a higher price than they were in previous years, it could influence the assessed value of your home. If you disagree with the assessed value of your home and believe your taxes are too high, contact your local property tax office. You may be able to challenge the assessment.
How often should I shop for new homeowners insurance?
You might want to price out homeowners insurance once every couple of years, or whenever you’ve made any major improvements to your home. Keep in mind that you may be able to save money on your current policy by increasing your deductible and bundling with your auto insurance.
Important: If a change of homeowners insurance is made, it is the responsibility of the member to notify Oklahoma Central of a new policy. This will ensure the policy is paid in a timely manner.
Can I reduce the amount my home is insured for as the loan balance goes down?
That is generally not a good idea, as your home is usually insured for its replacement value, not the balance of your mortgage. In the unfortunate instance your home is destroyed by a covered event, you want to have enough homeowners insurance to rebuild, not just pay off the remaining mortgage balance. The exception is private mortgage insurance. If you have paid down your loan balance to the point where you have enough equity in your home to equal at least 20 percent, you may be able to eliminate private mortgage insurance and lower your escrow costs.
What do I do if I switch my insurance company and you’ve recently paid my previous company’s premium?
Talk with an Oklahoma Central Member Financial Representative by calling 800-444-6228, Monday - Friday: 7:30 AM - 6:00 PM; Saturday: 9:00 AM - 2:00 PM. We will need your mortgage loan account number, the name of your new insurance company, policy number and insurance agent contact information. We will need to confirm that your new policy meets our insurance requirements. If we have already paid the previous insurer, you may need to contact them for a refund.
What if I have additional questions?
Email customerservice@oklahomacentral.org or call 918-664-6000, option 8, to speak with a member service representative.