Payoff escrow shortage? Or keep it rolled into mortgage payments?

Re: Payoff escrow shortage? Or keep it rolled into mortgage payments?

• kmurphy2131 member

  

  February 2016 edited February 2016

  abrewer5 said:

  kmurphy2131 said:

  We are currently looking for a house, buying our first house. So I didn't really know what escrow was, and after I read about it all I got SO annoyed.  I guess it's for people who can't figure out how to pay their own bills...but I have basically been doing my own "escrow" to pay our insurance every year (car & renters) and would much rather do it myself than have to have someone else do it.

  
  

  To the point of the post - I would pay it upfront, it can only help when looking to buy something new.

  
  

  I completely disagree with the bolded... I definitely know how to pay my bills and I have an escrow account attached to my mortgage. Usually, as others have mentioned, the banks push it on you when writing your loans, and typically won't let you know it's an option not to have one at all. It's the 'norm' to have an escrow account attached to your mortgage, at least in my area, so for many they just go with it.

  ETA: My escrow shot up $70 a month before we even made our first mortgage payment after signing all of our loan docs. Nothing changed with our property taxes/insurance in that time, so that was really frustrating. Since then our escrow hasn't changed much, only by a few dollars here and there. We almost always have an overage.
  

  I am sorry for those I offended with my poorly worded comment/a tone that wasn't conveyed well. I understand that escrow is not an option typically, and I do not think negatively at all of anyone who has an escrow account.  I just feel like the reason that it exists is so that banks can force you into savings your property tax & insurance mone to minimize their risks.  While I get that, I personally find it annoying because I would rather just do it myself.

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• vlagrl29 member

  

  February 2016

  short+sassy said:

  brij2006 said:

  Oh man, I would pull all of the escrow accounts out and just do the property taxes and insurance myself.  You're disciplined enough to do it and then you wouldn't need a minimum balance just sitting there for no reason or get hit with extra charges.  

  
  

  However, if you front load it like you do right now, I would factor in a 10-15% increase when doing your sinking fund to pay for the next years' premium and taxes.  It almost always goes up.  We factor another 10% just in case it increases (it usually does but not that much).  Anything that's left over we just put toward something else that month.  

  Great minds think alike!  As I was typing my post I was thinking, "Hmm...maybe I should talk to the bank with my personal home loan about stopping the escrow and changing it to my responsibility."

  The bolded is a good point that I need to start keeping in mind.  I expect insurances to go up a bit each year, but don't really think about it.  I also know my property taxes for my personal home will be going up a lot in 2017, because my area is being reassessed this year.  I expect it to double.  Need to plan for that also.
  

  This is what I would do as well.  That means you would pay your personal property and taxes separate at the end of year right?  Our home is paid off so that's what we have to do.  I budget it in our annual savings account.  Its figured into our auto deposit from checking into savings twice a month.

  
  

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• vlagrl29 member

  

  February 2016

  brij2006 said:

  LillibetteV said:

  brij2006 said:

  Many banks (especially larger ones) prefer to have the escrow account so they know for sure that the insurance and property taxes are being paid.  So it makes sense that some of them charge a higher rate for not doing an escrow.

  Personally, I would choose to get my mortgage from a different bank if they were going to do that. It's pretty much screaming that they don't trust me to be responsible.  Even though that may be their practice, it's not something I would be comfortable with.

  I mean....what if it they offered you an amazing interest rate and super low closing costs? My refinance required it to get the best rate available and over the course of the loan (including the closing costs) it saved me $70k in interest. The higher rate would have saved about $60k. I don't really care what an underwriter thinks of me personally if I'm saving $10k. Since I would need that money regularly to pay the bill myself it's not as if I'm passing up on potential investment returns. 

  This is just me being me and liking to have control over it.  I review our homeowners insurance constantly and am always looking to see if we can save some money by making changes or moving companies.  It can create a mess through an escrow account if someone switches companies mid-term.  

  I would honestly probably take the rate that was quoted and go elsewhere with it and see if the bank can match it.  Many can.  Our first mortgage was through a credit union we had nothing to do with and no accounts at.  Wells Fargo gave us a 5.5% rate (in 2008) with low closing costs, so we called around to at least 10 other banks to see if they could match it.  We really didn't want to go with Wells Fargo because of the housing crash and how that was becoming a mess to deal with them. The CU's rates were 7-10% at that time.

  This is me too!  We've been with state farm now for 4 years and I was thinking I would go over everything that we have with them to see how much it has gone up and possibly get a quote from another insurance company to save money.  We are always switching up insurance companies because it just keeps getting higher if you stay with the same one.

  
  

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