The Top 10 Reasons You Should Never Escrow Your Property Taxes And Home Owners Insurance With Your Mortgage

1. Mortgage companies love it when you tell them that you want to escrow your taxes and insurance with your mortgage payment. It reassures them that you are paying your taxes and home owners insurance every month and they get to manage. As long as you make your monthly mortgage payment there is nothing for them to worry about. The additional money you pay every month is collected by the mortgage company and put in a escrow account. When your taxes and home owners insurance are due the mortgage company will get a bill from your local city or county tax office and the insurance company and they just send them a check on our behalf.

2. Knowing that this is going to be taken care of by them many homeowners feel that this is comforting to know that its always going to be paid on time and its one less thing for them to worry about. The majority of homeowners elect for the escrow account thinking that they are coming out ahead. But are they?

3. The answer is no. Think about it this way. You are paying your taxes and insurance 6 or 12 months in advanced to a company to hold it in their escrow account. Not your account but their escrow account. What do you think this extra money you pay on top of your mortgage payment is doing? How about earning the mortgage company interest on your money. Since your property taxes and home owners insurance are not due for another 6 months its not like they are going to give up free money. They keep your money in their account and earn interest on it. Bet you did not want to hear that. This is such a cash cow for the mortgage company servicing your home loan. Not only will they know you are up to date with your property taxes and home owners insurance but they are just letting their bank account get fatter with interest you could have been earning. All because you want them to pay your bills.

4. Grow up already. If you can write out your monthly bill to pay your mortgage on time, why can’t you write a check to your county tax office or home owners insurance company on time. I know its depressing when you ahve to write a check out for a couple extra thousand dollars to pay your taxes and insurance (and it always seems that they are due around Christmas time) but think about how much you are giving up. I’m sure you didn’t buy the home in the first place thinking you could not pay your mortgage. So why go against your thinking to help out the mortgage company more.

5. As an example, let’s say your yearly property taxes and home owners insurance are $4,000. This would make your monthly esrow payment $333. If you had a 30 year fixed rate mortgage of $125k at 6% your principal and interest payment would be $750 a month. If you escrowed it would be $750 + $333= $1,083. Now, let’s put that $333 in a savings account that earns 2.5% -3%. You can find many online bank accounts like ING Direct and Emmigrant Bank that pay you these rates. If you put the $333 away each month and over one year your $4k would earn $120 at 3% in interest. This is for doing nothing but just putting it aside each month. The $120 is almost half of a month of escrow payments. A $120 might not sound like a lot but its better than giving the mortgage company the money.

6. Going back to the mortgage company if you let them escrow your money and they put it in a savings account earning them 3% its like you are paying them 9% interest on your money. The 6% from your 30 year fixed rate mortgage and the 3% they are earning on your money in interest from your escrow. Sucks seeing that. Take your money back and earn some your self.

7. Some county tax offices and home owners insurance companies will offer you a discount if you can pay ahead of time. It might not be a lot but if you have the extra money laying around to do it then why not. If the discount is more than what you could earn in interest in your savings account then the opportunity cost to do it far out weighs not doing it. If you asked your mortgage company to do this for you they will not do it and why would they. They will not earn interest on your money and they do not care about paying less taxes with your money. All they need to do is have your check post dated one day before its due. This way they can earn maximum amount of interest off of your money.

8. One of the biggest complaints with mortgage companies is that they screw up the escrow accounts anyways. If you plan on refinancing your mortgage with a different company than your current one than the new one will have to set up a new escrow account. Whatever money you had in your previous escrow account will be sent to you in a check within 10 days after closing but now the new escrow account needs to collect more from you to have at least 2 months worth of reserves. This is a policy most mortgage companies make. They want the two months of additional cash in there in case your state or county raises property taxes or if your home owners insurance company does the same. So with our example above with $4k, they really need $4,666 laying around earning them interest. If you ask to pay your taxes and insurance separately most mortgage lenders charge you an additional cost of .25% of the loan amount to do that. On our $125k this is $312 on top of your normal closing costs. Its like they want to earn more money from you some way or another. If you plan on buying a home I hope you have more than just your down payment and closing costs saved up. If you plan to escrow you will need your down payment + closing costs (no such thing as a no closing cost mortgage) + 2-6 months worth of escrow (need to put that reserve in there for the mortgage company to make sure they have enough to pay your taxes and home owners insurance) + any money that the previous home owner has paid on the tax bill for that property up to date. This can be a shocker for most first time home buyers because they did not know about the extra money for the escrow. Sometimes this will dis-qualify them for buying a home all together because they do not have enough saved up.

9. When your property taxes and home owners insurance goes up so will your monthly mortgage payment if you have it escrowed. It might only be $10 but it does go up. You will get a notice but I’m sure its a notice you do not want to see. If you did not have them escrowed you could deal with the county office at your own time. Since you escrowed you have to make the full mortgage payment or you will get a late on your credit report dropping your credit score and possible declining you from future refinances or home purchases. If you are battling with the tax office over raised property taxes and refuse to pay them then it will not show up on your credit report until well after they are due. You have been saving the money so you have it but hate seeing the Government raise taxes just because they can. Keep on making your mortgage payment so you do not fall behind. If you escrowed you would be forced to make the higher payment.

10. Do the smart thing and budget to pay your taxes and home owners insurance on your own. By doing so you will earn interest on your money and have better control of what your money is doing. You will not have to worry about your mortgage company sending your bill to the wrong office or getting notices that you do not have enough in your escrow account to make the tax bill (it does happen sometimes). Don’t give the mortgage company any more money than you need to. It does look like our President is going to sign a law in reforming the whole mortgage industry pretty soon. All and all it looks like a good bill except for the part where he is making new home owners and people refinancing, escrow their property taxes and insurance. I hope that part of the bill gets taken out. I think he’s doing it so the mortgage lenders can have more cash reserves on hand to help them get through this financial disaster. If you need to refinance a home loan or plan on buying a home get it done before the bill gets passed so you do not have to escrow with your mortgage.

Comments

  1. Nathan Redshield says

    Great peice, and written today!

    I won the right to pay my own taxes and insurance, had to pay $150 for that right on a 30-year 5.625% fixed but I feel it is worth it: crunched the numbers. Mortgage payments run $4200 per year; quarterly taxes amount to around $2000 (tax office is 250 ft from my condo and I will walk there when I pay them on August 1) with homeowners being $316/year with at least a 10% discount for paying one lump sum; same discount for auto insurance. Income varies throughout the year (summer is lowest but March and September are pretty high). Lastly I habitually keep a supply of free cash available so the 5 non-escrow checks a year come out of this source which I replenish in the course of my securities trades.

    Dangers with escrow: the mortgage companies have been known to be late with the payments, incurring late fees which they then charge you. They also of course will pay insurance in installments–the higher payments mean cash flow to them.

    I don’t know whether “W” is the source of the mandatory escrow (hope I’m grandfathered from escrow; I’d seriously consider selling some assets and paying off the mortgage rather than escrow, especially as I’m “thinning the securities herd” as the fall financial storms approach); it sounds like the sort of thing many Democrats like, sort of like union dues for a closed shop of a mortgage-borrowers union.

    What is important is that rather than earning interest on the escrow, the escrows are cash float for the mortgage companies. Float is a Useful Thing and can be a lifesaver for the mortgage companies who if you look at their finances are always “skating on thin ice”; a 5% default rate would be fatal to many of them. Further, no one has yet successfully explained to me how a CMO actually functions.

    An example of the Power of the Float: I’m a mean nasty person who charges a lot on credit cards ($13,000+ last year) but who pays in full each month like the old department store charge cards. I would not be caught dead using a debit card: might as well use Federal Reserve Notes. Right this minute I have charged $592 this month sine June 27 but not paid for it yet; that will happen in mid-August (I track the card charges: see, I’m a mean expletive-deleted). By then I will be hundreds of $$ into the next month’s bill so the process repeats. Effectively a month’s worth of purchases on an average net-20 days or so basis–and the credit card company gives me a %1 rebate too!

    Oh yes, it took years of study of corporate and business finance to get to the point of doing this–aplying business principles to Ordinary Life. Also saving money and not blowing it when young on frivolous things. Choose wisely. Yes, I am doing a Slow Liquidation but the money is in line to outlast me, and getting more income through work is the solution. The job(s) is sort of like the crops (corn, wheat, etc.) and the securities are sort of like the critter end of the “farm”.
    An aside: I’ve been told that in many parts of Pennsylvania there are part-time farmers; they have 2-day week jobs and spend the rest of the time farming. This explains the fairly rich looking farmsteads you see in some areas with the pricey cars in the driveways.

  2. says

    @ Nathan

    Sounds like you took the time to figure everything out ahead of time. Most people don’t take the time to learn this or do not care too because it is never taught to us.

    From what you wrote it looks you are a financially savvy person. I agree with everything you said.

  3. Kyle says

    This article is fair enough, but what you fail to mention is that some mortgage companies will offer a lower rate if you escrow taxes – in my case, .125%. Do the math, and I think you’ll find that taking the .125% on the full value of the loan, vs. the interest on your relatively small tax bill makes sense.

    If they’re not offering you anything, then I agree – pay it yourself. However, to say “never” is wrong. People need to take the example and do the math themselves.

  4. says

    @ Kyle

    I agree with the .125% over the life of the loan, but I had never heard of that happening. I worked as a mortgage banker for over 2 years and the company I worked at never gave a lower interest rate for escrowing your property taxes and insurance. Company policy was to charge the client a .25% fee on top of your closing costs for an escrow waiver. So at closing you would have your normal closing costs plus that fee. On a $100k loan that would be $100k x .25%=$250 to pay your taxes and insurance separately. The rate has nothing to do with it in this situation because they are not related. Mortgage companies and banks like it when you escrow because you are giving them more money to hold in their accounts so they can earn interest on your money. A lot of times mortgage bankers and brokers would make what you said into a play on words to make you feel like your getting a better deal.

  5. shy says

    1) Shopping around for a mortgage – ALL lenders offered me 0.25% discount if I choose to escrow !!! I still would not escrow just for the freedom of managing my own money the way I choose.

    2) Your math is wrong in several places:
    - ” you put the $333 away each month and over one year your $4k would earn $120 at 3% in interest.” — not quite so. (I’m rounding in all the figures below for simplicity) you get 3% only on your 1st payment. the 2nd earns 11 months of interest (2.75%), the 3rd only 10 months (2.5%) and so on. The last deposit should basically earn zero assuming you pay the whole amount at that time, but again for simplicity in rough figures you would earn through the year just 1.5% on your $333 => ~$60.

    - “…if you let them escrow your money and they put it in a savings account earning them 3% its like you are paying them 9% interest on your money. The 6% from your 30 year fixed rate mortgage and the 3% they are earning on your money in interest from your escrow..” — again, wrong. You pay 6% on your loan (let’s assume currently 80% of your home value) and 3% on your insurance and taxes (depends on where you live, but it’s safe to assume your tax will be at most 2% of your home value and insurance will roughly cost 0.5%) ==> so they will gain an additional 3% (or closer to 1.5% as shown above) on a much lower sum …
    Even using your own figures – they are making 6% on $125K + 3% on $4K ==> adding a tiny 0.1% to the 6%… (All my calculations above are not accurate and are VERY simplified to save time and still show the point)

    ANYWAY, I agree with your conclusion not to escrow, and as I said gave up 0.25% interest (5.875 vs 5.625) to buy my freedom to manage my own money my way.

  6. says

    @ Shy

    Thanks for commenting.
    1. I worked at a mortgage company for over 2 years. Every day we would get our interest rates for all of our programs. On top of what the interest rates were there would be price adjustments (points) for certain things. An example would be to charge a client 1% of their loan amount as a additional cost ON TOP of their closing costs if they took cash out of the equity of their home over 80% of the value of the house. At the company I worked at we charged ALL clients .25% (one time cost, i.e $100k loan x .25% =$250 additional charge) if they DID NOT escrow their property taxes and insurance. This is common amongst all lenders. Lenders want to have you escrow your taxes and insurance because it makes you pay them every month so you do not get behind. I applaud you for not escrowing. The interest rate has nothing to do with it. In most cases the mortgage banker or broker used it as a play on words or made you think that you were getting a deal. Check your closing documents from your last mortgage and you might see a “origination fee” or “discount points” on there. It might also be that the mortgage banker initially tried to sell you loan with a higher rate to cover the .25% cost and was able to “go short” to get you the deal. If you want to know for yourself just call a mortgage lender like Quicken Loans or Countrywide and ask them if they charge for paying your taxes and insurance separately. You will find out that they do.

    2. You got me on the math part there. I assumed I already had $4k in the bank when I did this not taking into consideration that the savings account started at $0.

    3. The 3% is what I hypothetically said they probably earn in their savings accounts. I agree with the tax and insurance % but I just made up those numbers. Are you taking an average to get the .1%? I do not see how you got that #. Are you adding the $125k +$4k to get $129k than using $125k/$129k to get the less than 1%. If so doesn’t this only mean that the balance they can earn interest on has only gone up by 1% and says nothing about the interest that it earns? All I see is two separate accounts, one earning 6% and another earning 3%. Regardless of what the balances are they are still earning those %’s.

    I am confident about the first answer, you got me on the second, and I feel that we both are right about the third. So I guess it would be a draw in a competition. I hope this shows everybody even more reasons to not escrow their property taxes and insurances.

  7. carol minkwitz says

    I have a mortagage and I escrowed the insurance and taxes. Is it too late to change it. I would rather have a lower mortgage payment. I didn’t realize I didn’t have to escrow. I would much rather pay these bills on my own. They all take credit cards which is great. My mortgage company will put 1% towards mortgage principle when I use their credit card.

  8. Carolyn Hardin says

    I am purchasing a pre-owned Mobile Home, and the lender says I have to escrow taxes. I have been paying on my property for a little over five years, and have receipts showing I have paid each year’s property tax in full and on time.
    I need to know, Do I have the choice of not escrowing? Can they force me to escrow legally? And, if I do escrow, will I still have to pay the county my property tax every year, also?
    Thanks, Carolyn

  9. Floyd Woosley says

    what type of a fee will the mortgage co. charge me to stop
    the escrow and pay the insurance and taxes on my own?

  10. Floyd Woosley says

    What kind of fee can the mortgage co. charge if I chose to
    pay the escrow on my own? I’ve had this mortgage since 1992.

  11. says

    @ Floyd

    The mortgage company will usually charge you .25% of the loan as an additional charge to let you pay your taxes and insurance separetly.

    i.e $100k loan x .25% = $250 more in closing costs.

  12. says

    @ Carolyn

    It depends on the mortgage company. With all of the changes in the mortgage industry the only way some mortgage companies will let you pay your taxes and insurance separetly is if you put a 20% down payment. Mobile homes have different financing guidelines than brick and mortar homes. So it might be because the mobile home lender makes their own rules and thats how it goes.

  13. says

    Alright, but don’t I *have* to escrow my taxes? I mean, is it really an option as a borrower? I was always under the impression that unless you had a certain LTV ratio, the bank would require that you escrow the taxes.

  14. says

    @ Dave
    From what I remember you are correct. If you have under a certain LTV then you do not have to. If you chose to keep them separate the mortgage company would still charge .25% for you to do it which is BS. The one thing I remember the most was how loans would get caught up in processing because we had to deal with an escrow company or we had to collect a lot more money to keep in escrow then what we assumed. Sometimes it killed a deal because the borrower did not have the equity to roll it in on the money to pay it out of pocket.

  15. Brian says

    Anyone know if property tax escrow is required for HARP refinance? I know its required for the HAMP–but what about HARP? I want to avoid this.

  16. Tony says

    I lost my Job and spent the escrow tax money to stay a foat. Now that work is back to normal My taxes is late and my mortgage company is threating to add it to my monthly mortgage. what can I do to stop them.

  17. says

    @ Tony
    Try calling the county to get on a payment plan for your taxes. I dont think the mortgage company can do anything.

  18. WTF says

    you guys are probably the same people trying to get rid of Social security withholding. these are items which will insure your future is secured. if you can afford to make the payments, you should. interest is paid on all amounts held in escrow. but as you can see escrowing is a program not meant for all.

  19. says

    @ WTF

    Just one person here. I am all for eliminating Social Security with holding or at least giving people the chance to remove themselves from the program. Did you know that social security is bankrupting the U.S future and is one of the biggest ponzi schemes of all time? I got a letter last year from the social security administration saying that they will be bankrupt by 2029. Why would I want to pay into that?
    Interest is earned for the company, not you in a escrow account. I agree that it is for some but if you can budget you can earn more money by keeping it in savings accounts at least.

  20. Diane H. says

    this article is way outdated, here on planet earth, USA banks are barely paying 0.1% interest, so how much really are you giving those terry nickell diming banks? better off to ban the beefsteak.

  21. Kevin nelson says

    As someone with several years processing and underwriting mortgage loans, I must say you make some valid points. However, there are a couple errors in your posting I need to adress… 1. There are federal regulations that regulate mortgage companies from earning interest on borrowers escrow accounts. Most mortgage companies are forbidden by law from earning ANY interest on a borrowers escrow fund. Mortgage companies are also required to give the borrower an aggregate adjustment for any extra monies in the escrow account once the tax insr bills are paid. 2. There ARE such things as “no closing cost mortgages”. Relocation loans (a special type of loan where a borrower is moving from one company location to another) offer borrowers the benefit of a direct bill credit. This means the borrowers closing costs will (most of the time) be completly paid for by the relocation company. The best point made in your post though is that it would be greatly beneficial for the borrower to set up their own investment account to put their own escrow payments in, allowing them to earn some interest on their own money. The fact remains though that a majority of borrowers chose to set up an escrow account for the convenience of it and nothing else.

  22. says

    @ Kevin

    Can you find info on the federal regulation? I could not find it.

    There is no such as a no closing cost loan. If the company is paying for you to relocate then they are assuming your costs. Hence, costs.

  23. says

    @ Diane

    The article is out dated but the point is still the same. Would you rather earn .0001% with your money in a savings account or escrow it with the bank and earn 0%? Something is better than nothing.

  24. Mark Weiss, P.E. says

    The property tax has got to be the most immoral tax on earth.
    How can a vital essential to life–particularly in cold northern climates–be considered taxable when food and some clothing is not?
    The logic of taxing the home or primary domicile is one of ‘they got you by the balls’ and the homeowner has no option NOT to pay, otherwise he faces a cabal of armed storm troopers bent on murdering him if he resists and chooses to protect his home for him and his family.
    In effect, the property tax criminalizes low incomes and creates legalized slavery.

    The right to life is the source of all rights—and the right to property is their only implementation. Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life. The man who produces while others dispose of his product, is a slave.
    Bear in mind that the right to property is a right to action, like all the others: it is not the right to an object, but to the action and the consequences of producing or earning that object. It is not a guarantee that a man will earn any property, but only a guarantee that he will own it if he earns it. It is the right to gain, to keep, to use and to dispose of material values.
    ["Man's Rights," The Virtue of Selfishness]
    It is only on the basis of property rights that the sphere and application of individual rights can be defined in any given social situation. Without property rights, there is no way to solve or to avoid a hopeless chaos of clashing views, interests, demands, desires, and whims.
    ["The Cashing-In: The Student 'Rebellion,'" Capitalism: The Unknown Ideal]
    The source of property rights is the law of causality. All property and all forms of wealth are produced by man’s mind and labor. As you cannot have effects without causes, so you cannot have wealth without its source: without intelligence. You cannot force intelligence to work: those who’re able to think, will not work under compulsion; those who will, won’t produce much more than the price of the whip needed to keep them enslaved.
    ["This Is John Galt Speaking," Atlas Shrugged]

    The above statements form the foundation of a free nation. Without property rights, there IS no freedom.
    The property tax is partly based on stale, Marxist class-envy politics. Karl Marx and Friedrich Engels were so eager to destroy the successful upper and middle-class “bourgeoisie.” Ever since the passage of the 16th Amendment, which granted the federal government the power to directly confiscate our income — our property — we can own nothing to which the government cannot also lay claim, at least in part. If there is a valid argument justifying taxes levied on voluntary transactions, there is absolutely no justification for a tax that is nothing less than State-sponsored theft. Though I would be incarcerated — and rightly so — for walking next door and taking money out of my neighbor’s wallet without his permission, the government makes this very act routine.
    The property tax is immoral and oppressive and deprives citizens of their necessities of warmth and shelter.
    It is with these facts that I propose that no law enforcement agent take part in the aiding and abetting of theft of homes from people who owe no voluntary mortgage, but who may be unable, due to the expanding greed of local government, to pay the extortionist and confiscatory taxes. No moral law enforcement officer should obey an order to remove an otherwise moral and law-abiding family from their rightfully owned home for inability to pay property taxes. This should be a fundamental part of the Oath Keeper’s pledge. Property and security in one’s home is a FUNDAMENTAL American right.

  25. says

    @ Mark

    You took it to another level. Agreed.

    I get a kick out of how many cities around the country are going bankrupt because of the record amounts of foreclosures. Maybe if they did not do property taxes in the first place and privatize everything the country would be in a better place financially right now.

  26. Mark Weiss, P.E. says

    Brad, it’s all about a small group of people wanting power over the rest of us. They convince the relatively ignorant masses (who have never been given the opportunity to learn a NON-ALTRUISTIC philosophy) that they would be better off with a nanny state, and plenty of lazy people vote for handouts. Democracies never last more than 300 years, as history has taught us, because as soon as the voters figure out that they can vote themselves a handout, it quickly becomes 51% deciding what to do with the other 49% of the people’s money. Wealth redistribution.
    A large part of this is to blame on religion, the big teacher of Altruism. The premise is that ‘every man is his brother’s keeper’ and that is used as ‘moral’ justificatio of taxation/enslavement. And it IS slavery, because if you don’t work for the government and pay those taxes, they will initiate force against you (take your house). There can be no freedom without the ability to own the fruits of one’s labors. There’s no Fourth Amendment safety if you’re taxes are in arrears.
    From a practical point, this can’t go on in a global market, where 3rd world commerce is forcing down American wages, yet school teachers and their unions continue to get 13% annual raises and job security (they can’t be fired unless they do something really bad like molest a child), while we take 10% pay cuts, layoffs, lose our 401K contributions, lose our medical, etc. And utilities double in cost every other year to the point where a family of modest means spends Christmas shivering in their own home because they had to use the heating oil money to pay the tax bill instead of buying oil. It disgusts me to no end.

  27. says

    @ Mark

    I finally started thinking like you do about two years ago when I was let go from my mortgage job. I started searching for reasons why the housing market crashed. The conclusion I came up with was the Government – Federal Reserve – did it. From there I ended up learning why our government does nothing but destroy wealth, family, etc. I kind of became a Ron Paul supporter because he is a free market kind of guy and now I know why.

  28. Mark Weiss, P.E. says

    Brad,

    I think you’re on the right track. The government regulation distorts business activity. In order to continue to function with irrational laws, business must sometimes do nefarious things that it never would normally have to do in a purely Capitalist society. The problem is when business gets caught working around the laws and then the government says “see? that proves we need to regulate MORE.” Criminals are made through this kind of legislation. The more corrupt the government, the more corrupt the business dealings necessarily become. Look at the former USSR… the people there are so used to dealing with an oppressive and corrupt government that they have become like hardened criminals. They become opportunistic, looking for any chance to take unfair advantage of another party they are trading with, because they were conditioned this way through a lifetime of Communism.
    As America falls further and further down the Rabbit Hole, we will see the business world increasingly in bed with government, so that it can secure its survival. It’s the old “if you can’t beat ‘em, join ‘em” routine. In short, corruption of economics by government breeds corruption by business. In short, that’s what happened in the mortgage market.

  29. alireza says

    very good article. I have Escrow from chase and I do not know how get ride of it. I should have a good excuse.

  30. Marcus says

    We had Countrywide previously and were paying our own taxes and insurance which afforded us a lower mortgage payment. Bank of America took over Countrywide and tried to get us into escrow by saying our property tax was delinquent (we pay monthy, 1/12th of the yearly tax). We were a couple of payments late, but paid a lump sum and zeroed it out at the end of the year. The next year we were more diligent in our payments but one was five days after the due date. The mortgage company started paying our taxes…at the same time we were paying…and we didn’t even know it. Suddenly we get a letter telling us we are in escrow and our mortgage has been increased by almost $300!! The tax office applied every payment they received and zeroed the account. Now the mortgage company is telling us we have to pay them back all the money they paid in order to get out of escrow. My question is this: Can they just arbitrarily pay our taxes like that and throw us into escrow? We live in Boston, MA. It seems like B of A has been trying to get us into escrow ever since they took over the loan and have resorted to just paying the taxes without our permission or notification.

  31. MJ says

    No need to tell people to “grow up already” as you do at #4 on your list. Don’t just assume everyone has an option to not escrow their property taxes. I always paid my own property taxes but with my mortgage on my new and current home, I had to escrow the taxes – it was a non-negotiable term of the mortgage as I was putting less than 20% down.

  32. says

    I think the only way to get out of escrow is to have more than 20% equity in your home when buying or refinancing now.

  33. Anon says

    I would just like to say that I did get out of paying into escrow after paying it for about 2.5 years. To my surprise, the mortgage company did not try and charge me. They said there was a checklist, of which all the criteria must be met. I was also told an escrow payment could not be due within 30 days of requesting to close the escrow account. Apparently, all the criteria were met, and a check for the remaining money in escrow was sent to me. The only catch is, they monitor your home insurance payments and your property tax payments. If you become delinquent on either of those, they will start making you pay into escrow again.

    P.S. I did put down 20% when I bought the home.

  34. Gina says

    We just closed on a house in the state of PA. We put 25% down and we did not want to escrow. They told us the day of closing that there was a new state law that says you have to escrow your taxes and insurance. Was this a lie. We financed through Provident

  35. Lynn says

    So you write an article in ten paragraphs giving one reason and claim it’s ten reasons? Wonderful! Do I trust someone who can’t count to 10 for reasons to give me financial advice? Hardly.

    Do I believe you on what the mortgage companies are doing with my money? Sure, however, you, oh cocky one, who thinks telling me to “grow up” proves your maturity, there are legitimate reasons to escrow even knowing all this.

    What are they? I’ll tell you when you grow up. Then again, based on your attitude, I’m sure you’ll figure it out the hard way eventually. ;)

  36. says

    @ Lynn

    I see 10 reasons. Never claimed to be a great writer so I’m sorry if they’re not clear. There is only 1 good reason to escrow your taxes and insurance and that is convenience. That is why its there. You giving the mortgage company the interest you would have earned saving it on your own. That is the trade off.

    Maybe telling people to “grow up” was a bit harsh and I apologize. Yes, I did figure it out the hard way. I worked almost 70 hours a week for 2 years talking to at least 10 people a day who did not know anything about finances. I would say around 80% were one paycheck away from financial disaster and all of the foreclosures going on around the country proves that.

    I grew a couple grey hairs at the job but I learned so much from being in that environment. I would learn more about a persons finances in 10 minutes then any of their family members might ever know about them. Kinda scary huh? I learned my lesson through other people’s mistakes.

  37. Anon says

    Anytime anybody tells you something is the “law,” make them prove it! That was a dirty trick to wait until the last minute and say you couldn’t escrow. If it were me, I would’ve delayed closing until I looked up this supposed “law.” Organizations thrive on our ignorance!!!

  38. Jessica says

    Hello Brad,
    I has a quick question. My husband and I recently decided to buy a nice piece of land from a good friend. We agreed to pay 80,000 for it- and paid 12,000 as a down payment with 3% interest.
    Do we need an escrow? Do we need a collection company? Are they the same?
    I have been planning on buying another piece of land from another person that would agree to carry a 1st or a second if the 1st was small (which it is) What would you recommend in general… and what should we watch out for?

  39. Bill says

    country is a sinking ship. they are taxing and feeing everything to pay for illegals, massive benies and OT for unionites, and pensioners retiring at 50-55 and collecting 6 figs till death. confuscatory taxes and feeing has imprisoned many in the states. as inflation and taxes eat up at least 40-60% of income. for what really?

    bad schools, roads in disrepair, health care for illegals and freeloaders, subsidies to countries that dislike us, social workers to the world. etc… trying to save 0.01% on property tax is a futile attempt to urinate in ocean of america.

  40. lina says

    I have a 30 year FHA mortgage with 6.5% interest. The mortgage company told me that if you have a FHA loan you must have an escrow account. Is that true? So there is no way to pay taxes and insurance on my own?
    Thank you.

  41. Carol Gregson says

    Due to unforseen medical and vehicle expenses I was unable to pay my property taxes on time, this has happened in the past and they were just paid late. The mortgage lender said nothing the first time this happened but now they have apparently paid my taxes and set up an escrow account. I sent them a letter explaining that I would pay my taxes and could not afford to have my house payment increased but they did it anyway and I signed nothing allowing this. How can they do this without my permission.

  42. Rick says

    My mortgage lender is charging me 1/4 point if I don’t escrow….comes to about $850.00. My taxes and insurance run about $700.00 on a monthly basis, taxes paid twice yearly. If I keep this money and invest it, I still need it to be liquid so I can make the tax and insurance payments. And these days, if I need a liquid investment, the interest would be miniscule and it would take me forever to make up the $850.00. Any ideas on how I can make up this $850.00 in say 3 to 5 years or less?

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