Confused about pre-paid insurance and HOA fees

[Mommy Of A Little Angel]

When we closed on our house, we pre-paid a year of home owners' insurance and a year of HOA fees. Maybe I am completely confused, but why am I getting bills for insurance and HOA? Is the money held for some reason and not actually applied to this years bill? Or, should they be paying this bill? I am sure this is something I am supposed to know...

Thanks!

[Lilysmom06]

I don't know about HOA fees, but the year of homeowners insurance is for this year. The bank then collects 1/12 of the amount each month, holds it in escrow, then will pay Next years insurance policy with that money. So you should never have to pay a full years premium at once again (until you pay off your house, of course!).

Kathy

[Mommy Of A Little Angel]

So they should have started to pay it this month? I paid it the day after it was due because they hadn't paid it yet and I was worried about late payments.

[o_mom]

If you have an escrow account, then the bank or credit union who holds the mortgage should be paying the homeowner's insurance and property taxes from your escrow account. I'm not sure about homeowners association fees, but that could be included too. You need to contact the bank and find out why they have not paid these things. The first year's funds that you paid at closing should have been used to pay for this year (from closing date to 1 yr later), then they collect 1/12th with each mortgage payment to save up for paying next year. ETA: It could also be that the bank never told the insurance/HOA who to bill, so they just send them to you. I would start with the bank, though.

This is why we didn't do an escrow account because not only do they get to earn interest on your money all year, but you are at their mercy to pay the bills that keep your property protected. :-(

[Mommy Of A Little Angel]

Yeah, I am not liking that someone else has the responsibility to pay my bills on time. I much prefer to control things like that. I guess I will have to call the bank and see what is going on there.

Thanks for the help!

[vonfirmath]

You might also find out about the homeowner's insurance on your loan.

My experience was that the insurance you were required to have ONLY protected the bank if something happened to your loan -- you still needed your own insurance to protect you as well.

[Momof3Labs]

You are thinking of private mortgage insurance - PMI. The OP is asking about homeowner's insurance paid through her escrow account; homeowner's insurance is absolutely required of everyone who has a mortgage.

[vonfirmath]

Homeowner's insurance is absolutely required of everyone who had a loan (and I had it) But it was also on my loan and what was on my loan was in ADDITION to PMI and would not have protected me one whit if my house burned down.

[Momof3Labs]

Sounds like your bank was just trying to get some extra money out of you. If your house burned down, your homeowners insurance would pay you and you would have to use that money to pay off your mortgage. PMI is required by lenders when the loan-to-value ratio is too high; that protects them (pays them what they are owed) should you default on the loan. There isn't anything else that is normally required unless, as I mentioned at the beginning, the bank is trying to take more money from you, which isn't unheard of.