Tax and Insurance Overview:

Your residential mortgage tax and insurance account is used to collect and disperse funds required to cover homeowner’s insurance, property taxes, flood insurance, and/or private mortgage insurance expenses. This account is sometimes referred to as your escrow account.

Your monthly mortgage payment includes funds to pay for your annual insurance and property tax expenses. These funds are deposited into your tax and insurance account and periodically withdrawn, by Centennial Lending, to pay these expenses. Your tax and insurance account balance changes as these deposits and withdrawals occur. The amount required to keep your tax and insurance account adequately funded is dependent on the actual amount of these expenses and directly impacts the amount of your monthly mortgage payment. In most cases your monthly mortgage payment will increase over time to account for the rising cost of insurance and property tax.

Unfortunately, the amount required to cover future expenses is difficult to predict as the information is not available when Centennial Lending adjusts your monthly mortgage payment. Centennial Lending uses the actual expense amount from the previous year to estimate the amount required to keep your escrow account adequately funded. This often results in a tax and insurance account “deficit” at the end of each year as the property taxes and insurance expenses increase year-over-year.

The unpredictability of these expenses impacts your monthly mortgage payment in two ways:

Deficit: A “deficit” occurs when there is a negative balance in your tax and insurance account. This occurs when there are insufficient funds to cover the tax and insurance payments for the current analysis period. Deficits can be paid in a lump sum or divided by twelve (months) and included in your new monthly payment. Paying a lump sum reduces the increase in your new monthly mortgage payment.

Shortage: A “shortage” occurs when the projected funds in your tax and insurance account are insufficient to cover the projected insurance and property tax expenses. The total shortage is divided by twelve (months) and this new amount is added to your new monthly mortgage payment resulting in an increased payment amount.

Tax and Insurance FAQ:

This statement describes the amount paid into and out of your tax and insurance account to cover your homeowner’s insurance and property tax expense during the past year. It also projects how much will need to be paid out in the coming year. This statement will also indicate if there was a “shortage” of funds from the previous year, the amount required to cover the projected future “deficit”, as well as a new monthly mortgage payment.

In the event you have a fixed rate mortgage any increase in your monthly mortgage payment is the direct result of an increase in your property taxes and/or property insurance. While we are happy to help explain these changes, we do not have the ability to impact these costs or the amount of money required to fund your tax and insurance account.

Your tax and insurance account is analyzed once per year at which time the amount of required funds is likely to change.

Your payment changes even when the previous year “deficit” is paid in a lump sum because the amount needed to cover the future “shortage” has increased. A “shortage” is caused by increasing property tax and/or insurances costs.

Increases in homeowner’s insurance and/or property taxes are unpredictable. While Centennial Lending knows these expenses are likely to increase, tax and insurance account requirements must be based on actual information from the previous year.

The best way to avoid an tax and insurance funds deficit is to keep track of your homeowner’s insurance premium and your property tax bill. Compare the actual expenses against the projected amount on your annual Tax and Insurance Account Disclosure Statement and adjust your monthly mortgage payment accordingly.

Some expenses come due in the middle of the computation/analysis cycle. When this happens, the “projected” amount to be paid changes to the “actual” amount disbursed.

Property taxes are paid according to the tax district in which your property resides and may be paid quarterly, semi-annually or annually. In the event that Centennial Lending is collecting funds for your taxes, we will make sure that your property taxes are paid on time.

Homeowner’s insurance premiums are generally paid once or twice a year. You can log into your online account and review your “payment history,” which can be found under the “payment” tab, to see when your premiums were paid.

You can log into your online account and click on the “payments” tab. Next, click on the “payment history” tab. From here you will be able to see when your taxes and insurance were paid.

Still Have Questions?

Please call us at 720-915-9711 or email us at TI@centennial-lending.com.

Centennial Lending Logo White