Mortgage: Escrow vs Manual payments

[cKGunslinger]

If your mortgage holder keeps an escrow account for your Ins/Taxes, can you simply ask them to stop collecting it and choose to pay it manually?

I can't help but to think that having that couple of thousands of $$$ I'm paying for them to hold onto for 12 months would do slightly better in my ING account, as long as I have it auto-deposited from my paycheck each period.

Is there any reason why they wouldn't let you do this? Do I just call them up and ask and they'll send me the remaining balance?

 

[Mermaidman]

With our mortgage, one of the stipulations for the low interest rate was that the property tax and homeowner's insurance be escrowed. Just call your lender and ask.

 

[FrustratedUser]

IMO not worth the hassle to do it yourself.

 

[FoBoT]

some lender might let you, but i don't see the benefit outweighing the conveinance

 

[Chewy]

I thought the exact same thing, so I called to stop the payment. I like it because it gives you a more accurate representation of your actual mortgage, plus the interest you get from investing it. To me, that outweighs the "inconvenience" to send 2 checks per year.

 

[BillGates]

We don't pay escrow and just stash money aside for taxes (paid once or twice a year) and homeowner's insurance (paid once a year). It isn't a big deal and we get a bit of interest on it - the two combined end up costing us roughly $4350 a year.

 

[IronWing]

We do the "do it yourself" escrow by putting aside the tax and insurance money every month (plus money for long term maintenance). Some lenders will let you out of escrow, others won't. The lenders' concern is that if you allow insurance or taxes to lapse, they could get burned.

 

[cKGunslinger]

Yeah, ours is ~$3500 - 2 checks per year. I still get the bills and follow-up notices from the Insurance company asking for payment, because WaMu waits until the very last second to actually disburse the payment.

Doesn't seem like it would be that much hassle, and ~$100 in earned interest per year, while nothing major, is certainly worth the 10 minutes per year to write a pair of checks.

 

[alkemyst]

If you need that 3% yield that bad and can definitely come up with it each time then you can try that. Nice thing about escrows is should something skyrocket one year they still pay it and just adjust your payments accordingly.

Many people don't realize that although their taxes may be $x,000 per year, the following year they can double or worse once the home is reassessed.

 

[cKGunslinger]

Originally posted by: alkemyst
If you need that 3% yield that bad and can definitely come up with it each time then you can try that. Nice thing about escrows is should something skyrocket one year they still pay it and just adjust your payments accordingly.

Many people don't realize that although their taxes may be $x,000 per year, the following year they can double or worse once the home is reassessed.

That is a good point to consider...

Oddly enough, after our first 1/2 year of having the mortgage, WaMu sends us a letter that basically said, "Oops, we royally fucked-up your escrow calculations, so we're going to have to triple them for the next 18 months to get things right."

 

[BoomerD]

Originally posted by: alkemyst
If you need that 3% yield that bad and can definitely come up with it each time then you can try that. Nice thing about escrows is should something skyrocket one year they still pay it and just adjust your payments accordingly.

Many people don't realize that although their taxes may be $x,000 per year, the following year they can double or worse once the home is reassessed.

Fuck that. Kahleeforneeya's Prop 13 FTW!
My assessment can ONLY increase by 2% annually MAX.

 

[alkemyst]

Originally posted by: cKGunslinger

Originally posted by: alkemyst
If you need that 3% yield that bad and can definitely come up with it each time then you can try that. Nice thing about escrows is should something skyrocket one year they still pay it and just adjust your payments accordingly.

Many people don't realize that although their taxes may be $x,000 per year, the following year they can double or worse once the home is reassessed.

That is a good point to consider...

Oddly enough, after our first 1/2 year of having the mortgage, WaMu sends us a letter that basically said, "Oops, we royally fucked-up your escrow calculations, so we're going to have to triple them for the next 18 months to get things right."

chances are it wasn't them, they can't see in future for reassessments.

 

[Greenman]

For the record it's not an escrow. Takes and insurance are paid into an impounds account, and dispersed twice a year.

 

[Dirigible]

I pay taxes and insurance myself, not through my mortgage company. I prefer it that way. Never really thought about why.

 

[cKGunslinger]

Originally posted by: Greenman
For the record it's not an escrow. Takes and insurance are paid into an impounds account, and dispersed twice a year.

Maybe, but the word "impound" is not listed anywhere on my statement, nor my online account, while the word "escrow" is.

 

[jiggahertz]

I got a 1099-INT this year for my escrow interest. A grand total of $18. I think this was the first year I received interest on my escrow, I usually owe money at the end of the year.

 

[PingSpike]

I just pay my taxes and insurance myself. Honestly, I don't really take advantage of the interest I could earn (sits in the checking), but I do get cash back paying my insurance with a credit card.

It'd be kind of hard to get much interest out of the property taxes anyway, since I have to pay them four times a year.

I guess I don't like the idea of one bill that includes all of those things, I prefer it more transparent. If a mortgage offered a better interest rate with escrow as a requirement though, I would take the lower interest rate.

 

[ponyo]

People make a big deal about escrow but for most people, it's the better option. Majority of the people will lack the discipline to save and set aside on their own and will be in deep trouble come tax time. I don't have escrow and I pay on my own but twice in ten years I was late with the payment because I forgot and it cost me 10% penalty each time along with interest for being couple days late.

 

[alkemyst]

Originally posted by: PingSpike

I guess I don't like the idea of one bill that includes all of those things, I prefer it more transparent.

They do give you a piece of paper that neatly breaks this out at closing and then each year.