Bear with me; I've been in a very posty mood this past week! 
So I haven't heard back from the mortgage company about how much of the increase is temporary and when that part will go away. But I found the breakdown on their not-very-intuitive website, and I think I remember the temporary escrow shortage fee would be 12 months. So I think I've got it figured out.
Here's how our payment breaks down:
Principal $676.86
Interest $1,177.24
Property Insurance $360.38
County Tax: $435.86
Mortgage insurance: $262.89
Shortage makeup: $188.71
Total Payment:$3,101.94
(As a reminder, this is a 30-year loan. First payment was 6/1/2015. Interest rate is 3.5% fixed. Principal balance is $403,000. Zillow home value is $538,000.)
So, the good news is, nearly $200 of the increase is temporary. Next August it will go away.
But besides that, I see a few things I should probably consider.
First is the homeowner insurance. I've already got a call in with a broker who should be getting me a quote any day now.
I did hear back from my current broker and he showed me what it could look like with reduced replacement value but he also tacked on a new expense to his estimate. I know I could turn that down but it was just frustrating that he really didn't get that I was trying to cut this extremely big expense down. Anyway, assuming I did say no to the new item and yes to the new quote otherwise, it would be $4082. Vs. the current $4325. So it would save us about $20 per month. Better than nothing, but I want to wait and see if the broker can find anything better.
Second thing to consider is interest rate. I don't think I could do much better than 3.5% on a 30-year loan, but I'll keep my eye out. I know we could get better rates on a 15-year loan but that it would also mean higher fixed payments, so I'm not sure we'd want to do that.
Third, that mortgage insurance. If the Zillow value is anywhere near accurate, we have about 25% equity in the place. However, our current loan is an FHA, and that mortgage insurance doesn't go away when you reach a certain amount of equity. I think it stays for 11 years or something.
Now I'm wondering if a refi would be worth it if only to eliminate that $260 per month. If we got incremental improvements from a lower interest rate and found a slightly cheaper insurance, the combined benefit could be pretty good.
But with that escrow shortfall, I don't know if that affects it. Would we need to pay it off? Roll it into the new mortgage?
I emailed the real estate agent who sold our condo for us to see if she has a good mortgage broker she can recommend. I really don't want to use our last guy; he very much got on my nerves with all the misinformation about how much we had to pay upfront on our last refinance in early 2015.
Just thinking out loud about all this. And, of course, happy to read any thoughts/advice you all have!
More mortgage/homeowner insurance musings
August 4th, 2016 at 10:09 pm
August 4th, 2016 at 10:26 pm 1470349569
August 4th, 2016 at 10:35 pm 1470350130
If that is truly how it works, now may be a very good time to refinance.
August 4th, 2016 at 10:45 pm 1470350721
August 5th, 2016 at 07:03 am 1470380596
I just refinanced with Quicken to get rid of PMI and lowered the interest rate by1.25% I sign on Monday. It would be smart to talk with someone to get a rough estimate and Quicken can do that over the phone without even running you credit to see if it was worth it. They would use zillow and trulia as estimates just to see where your numbers are. Getting rid of $260/PMI is huge plus perhaps a lower rate would save some money. Just the PMI woudl save you $3100 per year or 30k over the next 10 years.