A Refund from my Overfunded Escrow Account

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As I wrote in an earlier post, I use QuickBooks to organize my household finances.  Like every good accountant, I am detail oriented and keep meticulous records.  I keep every receipt, reconcile each of my accounts monthly, and split the expense categorization of grocery bills between food, cleaning and baby products (OK, just kidding on the last one). One transaction that I do split out every month is my mortgage payment.  My mortgage payments are made up of three parts: loan principal, interest, and escrow.  In case you don’t know what an escrow account is, it’s a cash account that the lender holds and maintains to pay property taxes and hazard insurance. To keep track of my escrow account balance, I created an account in QuickBooks for it under other current assets.  When taxes and insurance payments are made by the bank, I enter those in QuickBooks as expenses out of the escrow account.  I frequently tie out my escrow account balance in QuickBooks to the loan statements. Lenders usually do an escrow analysis every year to adjust the amount of the escrow payment so the balance in the account is sufficient to cover the expenses.  Usually, the amount of the mortgage payment goes up as tax and insurance rates increase.  However, in my case, I significantly decreased my insurance payments (a good subject for another blog post) and my property tax payments have also decreased due to the crash of the Las Vegas real estate market. Recently, I noticed that my escrow account had a large balance despite barely having made payments for taxes and insurance.  I sent the following e-mail to the bank:
I think our escrow account is overfunded. I’d like to request an analysis and receive a refund of any overfunded amount.
The next morning, I was delighted to receive the following e-mail from the bank:
Per your request, we have analyzed your escrow account based on the current escrow balance. Your new mortgage payment is $X effective September 01, 2010. Also, an overage amount of $X has been mailed to your mailing address.
Sometimes having organized financial records pays off.  I’ve got the check to prove it.
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Comments (5)

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    Mrs. Jackson

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    Hello Dustin,

    This info you have posted is awesome. I have received a check from my mortg co for an escrow overage refund…I recently added quickbooks to my laptop and i wanna know how to use it to calculate my escrow also. Would you please email me at (removed) and explain how you set this up on quickbooks for me…it will be greatly appreciated…thanks for your time and consideration.

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    Dustin Wheeler

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    Mrs. Jackson,

    Thanks for your comment. As I mentioned in my post, I created a new account in QuickBooks called “escrow” as an other current asset. Each mortgage payment is split in QuickBooks between principal, interest and escrow. I use the register function in QuickBooks to enter property tax and insurance payments from the escrow account.

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    Allan

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    I read your note and was interested in how you recorded your check in quickbooks. I have the escrow account setup. I tried using a general journal entry but the bank account balance didn’t increase to reflect the change (this will be a problem when I go to reconcile witht he bank statement). Please help with how to correctly record this check.

    THanks in advance for your help.

    Allan

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    Dustin Wheeler

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    Allan,

    The general journal entry to record the deposit would be a debit to cash and a credit to the escrow account. Hopefully that helps!

    Reply

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    Elise

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    Hi,

    I’ve followed these steps to adding escrow, principal and interest to each monthly mortgage payment. When I go into the register to debit the hazards and property insurance that has been removed for 2013, I show a surplus of $1360.92 whereas my lender refunded me an overage of: $1301.64. So I am over by $59.28, and all the numbers I have entered for escrow and debits are correct. Where could this change be hiding? Or perhaps the lender holds onto more than what is due? I’ve been really trying to figure this out because I want to be able to deposit the refund check in QB with the correct amount of $1301.64. I wasn’t sure if the year began from 01/13-12/13, but even this wouldn’t matter as the amount is too little to account for this. Thanks in advance!

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