What is replacement reserve?

[porcelina68]

What is the name of your state? Indiana

I just closed on a brand new house a few weeks ago, and received my mortgage payment book in the mail. Since my payment is lower than I was expecting, I called the mortgage servicer to find out why. They told me that an amount titled "replacement reserve" is deducted from my mortgage payments every month. But when I asked them to explain that to me, they couldn't answer the question. Does anyone know what exactly this is, and why it is being subtracted from my monthly payments? Is this going to hurt me in the long run?

 

[HomeGuru]

What is the name of your state? Indiana

I just closed on a brand new house a few weeks ago, and received my mortgage payment book in the mail. Since my payment is lower than I was expecting, I called the mortgage servicer to find out why. They told me that an amount titled "replacement reserve" is deducted from my mortgage payments every month. But when I asked them to explain that to me, they couldn't answer the question. Does anyone know what exactly this is, and why it is being subtracted from my monthly payments? Is this going to hurt me in the long run?

**A: the information that you seek is avallable by conducting a search utilizing any major search engine. Please post the response and any specifc questions that you may have with respect to this issue and we'll try to help you then.

 

[porcelina68]

This is what I have found on the definition of replacement reserve.

*Cash and investments set aside to be used for future major repairs and replacements to an association’s common property*

My question was why is a replacement reserve being deducted from my monthly mortgage payment? Does this have anything to do with the fact that I paid for a year of homeowner's insurance coverage up front prior to closing?

Don't get me wrong - I'm not complaining because since this is taken off, my monthly payments are going to be quite a bit less than the mortgage broker told me they were likely to be (my first payment isn't due until Sept 1st). But, will this only apply to the first year, or will this be for the life of the mortgage? I can't seem to find a comprehensive answer.

 

[HomeGuru]

This is what I have found on the definition of replacement reserve.

*Cash and investments set aside to be used for future major repairs and replacements to an association’s common property*

My question was why is a replacement reserve being deducted from my monthly mortgage payment? Does this have anything to do with the fact that I paid for a year of homeowner's insurance coverage up front prior to closing?

Don't get me wrong - I'm not complaining because since this is taken off, my monthly payments are going to be quite a bit less than the mortgage broker told me they were likely to be (my first payment isn't due until Sept 1st). But, will this only apply to the first year, or will this be for the life of the mortgage? I can't seem to find a comprehensive answer.

**A: please contact both your mortgage broker and your mortgage lender and post back with what they told you. Hint: do not take an "I dunno" for an answer.