- November 19, 2023
- Posted by: legaleseblogger
- Category: Related News
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****** just grabbed a
I got rid of escrow when I refinanced in 2021. My lender couldn’t believe that not only did I want to get rid of my escrow, but I also didn’t want to take any cash out in the refi.
I’ve been very disciplined about setting money aside monthly for taxes and insurance, and I don’t regret my decision at all. If anything, paying my taxes and insurance in person has made me pay much more attention to what exactly I’m paying (and voting) for.
100% yes… never escrow unless you have to. Not only better from a lost opportunity stand point but also more consumer protection violations occur in escrow accounts than any other financial product (source: my wife who works in banking compliance management)
Only downside is loss of convenience. Pay an equal amount each month with your mortgage and forget about it.
If thatÔÇÖs not a big deal and youÔÇÖd rather just set it aside in a HYSA instead, that works.
With $6K in annual costs, that means an average balance of $3K if starting from zero and cleaning it out at the end. With a 5% HYSA, that means maybe $150/yr. Not huge, but not nothing either.
As long as you think you can manage it, there’s really no reason not to.
I dumped mine earlier this year. It will be one less hassle to deal with if/when I switch insurance companies again. Also, I can use the insurance and property taxes to meet credit card sign up bonuses more easily.
Assuming you can cancel it without having to pay a large fee, sure.
I tried to cancel my escrow account a few months ago, and my servicer wanted to charge me 0.25% of the outstanding principal balance of the loan as a cancelation fee. That would have been over $1000 in my case, so it wasn’t worth it.
Do you have to refinance to remove escrow?
Do they allow you to self manage escrow?
I am living in my 8th house and haven’t had an escrow account in several decades. I’m an adult and know when taxes and insurance have to be paid just like all of my other bills. I also prefer to know that every month, every year, my mortgage payment will always be the same. The interest is a minor reason for not having escrow.
And if you have an escrow, you may not be reminded to shop your insurance every couple of years.
In late 2020 I refinanced to get a 2 1/4% mortgage and take out $150k from my equity. I was going through the closing statements and noticed that not only had they included the taxes due in January, but they were taking $150 more than my tax bill. When I asked why, they said, that’s the late fee. We are closing the first week in December and they can’t pay the taxes by January 31st?
Can also pay property taxes with credit card to earn sign up bonuses. I do it every year for multiple properties.
Dumped ours years ago. Love paying my insurance and taxes with credit cards that earn me travel points. Also, I get a discount for paying my taxes early. Escrow always waited last minute to pay it which costs $250ish more.
We donÔÇÖt escrow. Just save the cash in a HYSA and write the check.
Currently about to write a $7900 tax check..,
There are no advantages to mortgage escrow accounts unless you can’t, or do not want to, manage your own finances. I’ve never had an escrow account because I don’t trust someone else to pay my bills.
RTFM – ÔÇ£Read the Fudging MortgageÔÇØ (wow, that one worked out better than I thought it would, using the M for manual :D)
Anyway, mine says that to cancel escroew, I need to pay up, it shows it in the Fees section on the back of my mortgage statement, but check yours. Mine is under ÔÇ£escrow deletionÔÇØ, and itÔÇÖs 0.25% of unpaid principal balance at time of approval for deletion.
For me, today, thatÔÇÖs about $500 in order to get rid of the escrow account, and self manage it.
You wonÔÇÖt have 6k for 20 years. You will have zero, build up to 6k, then back to zero. Unless you have 6k, then build up to 12, and then fall back to 6. In either case, your ÔÇ£upsideÔÇØ will be 0, add 500 a month to get up to 6k for the year.
(using an investment calculator from calculator.net) that means that you get 135 (ish) in interest each year, with a 5% APY (which is generous, but doable, TODAY, that wonÔÇÖt be forever). That amounts to 2720$ in interest at the end of 20 years.
If I drop the 500 in the same 5%, it earns me 826 in interest, so by deleting the escrow, youÔÇÖre ÔÇ£upÔÇØ about 2k.
Skip one starbucks drink a month and youÔÇÖre break even, on the scale of 20 years/mortgages here. Really depends if you want to self manage it or not. Brokers donÔÇÖt make money off of YOUR escrow, they make money off of BLOCKS of escrows. They make a pittance from the individual. If you want that pittance, go ahead. IÔÇÖm not going to fuss over mine.
I stopped putting our money in escrow when we refinanced. There was absolutely no point of it and I was getting frustrated bc the company that was managing our escrow would do an “escrow analysis” way too many times, which would cause a fluctuation in my monthly payment.
So, my vote would be yes, dump the mortgage and self manage. It you have the willpower to not spend it, do it
Yes.
I never escrow.
I pay my insurance and taxes in full and get a discount on both.
If you have escrow now for taxes/insurance then your rate was locked under the assumption of there being escrows (you got a lower rate by them being escrowed).
You need to contact your loan servicer to see if it’s even possible to remove the escrows without having to do a refi.
If you can budget for it, go for it.
My taxes are $10k/year. AinÔÇÖt no way IÔÇÖm cutting that check so I keep the escrow
I manage my own. Ever since I changed insurance providers and got a refund, and couldnÔÇÖt easily send it to escrow to prevent a shortage IÔÇÖve looked to just manage it myself. ItÔÇÖs just easier.
i manage my own. my company lets me split my check into different bank accounts. So each check I send the money earmarked for property taxes into it’s own account to earn the interest. Makes it easy to manage.
Yes! I just did it and it’s so freeing knowing that I can set my own reserves and don’t owe a big chunk of money to the bank for a “shortage”.
Just don’t forget to send them proof of payment on your county/town taxes, and a copy of your insurance binder when you renew each year.
I forgot to send mine to Mr. Cooper the first time and they paid the taxes because they didn’t know it had already happened. Took many months of arguing and back-and-forth to get it all ironed out (this headache was my own unintentional doing, I get it).
Yes, I always prefer paying my property taxes and insurance myself instead of escrow.
Assuming your able to manage your money, I know some people rather have it done on monthly basis since they are unable to save the money aside themselves to pay it in full every year.
I was going to get out of the escrow racket but my lender pays interest on the account at a competitive rate so itÔÇÖs almost moot.
But the main reason is that they want me to prepay next years property taxes (in addition to this years which theyÔÇÖre withholding for and paying) before theyÔÇÖll allow me to drop.
Self-managing your tax and insurance payment is a valid decision. You seem to understand the tradeoffs well. It may allow you to earn a bit of interest (or other very very safe return), smooth your cashflow (because there won’t be escrow adjustments) and take advantage of seasonal cash flow (e.g. Q4 bonus or commission), but you have to be disciplined/planful to set the money aside AND ensure you know what your tax bill and insurance will cost (often go up dramatically).
Whether you qualify is another story. Review your original loans docs. There is often a max LTV and min. # of on-time payments required. The last time I requested an escrow waiver, the note required 78% LTV (or 80% with updated appraisal at my expense) + 24 months of payments.
Also you can usually, at least my county you can, pay for property taxes with a rewards credit card. Then pay the balance off.
Yes. We do it and itÔÇÖs so nice to not worry about it. My sister had nightmares with hers not paying on time.
Yes, especially if you have plenty of cash reserves to front these things when they come due. Even just the interest on that money is a few hundred dollars a year in profit. When I had an escrow account, the one thing that I thought was ridiculous, was how they couldnÔÇÖt nail the numbers. It seemed every year IÔÇÖd either be asked to front some large amount of money or IÔÇÖd get some check back for an overpayment. Finally, I was like what the hell am I doing with this? I can afford to write a check.
Seriously for all this work you might come out ahead 1 or 2 hundred max. DonÔÇÖt think the hassle is worth it imo but more power to anyone who does. My concern lies with the consumer protection violations. I feel violated by these guys every year but idk if anything is actually actionable.
I did my last mortgage without an escrow: I opened a separate savings account for my escrow, and auto-transferred into it twice a month (at each paycheck). When taxes or insurance were due, I could just transfer the amount back to checking and pay from there. In my state (PA), the county, school district and local township all insisted on mailing bills to the taxpayer regardless of whether you were escrowing., so paying them myself was no more difficult than mailing them to the mortgage company. Doing the auto-transfer even removes most of the discipline required because that ends up being money you don’t see as available.
just make sure youre set to autopay property tax and insurance. escrow has always been a scam, like PMI. money for nada. escrow folks sit around and eat shrimp cocktail all day, counting your money.
Just put 20% down so i donÔÇÖt have to escrow. ItÔÇÖs awesome. IÔÇÖve had an unusual year but IÔÇÖm at snot 500-600 in interest earned this year. And no surprises from the idiot mortgage company.
How do you actually dump the escrow without refinancing? Genuinely curious.
I did. Pain in the ass when you get the tax bill but I know itÔÇÖs coming. My problem was that our escrow kept paying the wrong insurance company. Finally it was screw you. IÔÇÖll do it myself better.
Yes, it is not hard.
I pay my insurance in full annually gives discounts that essentially offsets investing the money. Pay RE taxes quarterly, and it is easier to refi the mortgage in future if needed.
It’s a small number dude….$25/mo.
Wait, wait, wait, wait, am i not required to have an escrow?
Another reason not to have an escrow account – the mortgage company can decide at any time to charge you fees and take those fees from your escrow. Closed on a new construction home in Nov of 2007 with a mortgage from Chase. In March of 2008 the builder shut down unexpectedly, didnÔÇÖt think it would have much impact on us until all the mechanics liens came flooding in because the builder never paid the subcontractors that actually built our house. It was a mess but title insurance stepped in, provided a lawyer, and took care of everything to remove the liens. The whole process dragged on through the summer of 2011 before it was settled. I then check my escrow statement and see a line item for ÔÇ£legal feesÔÇØ -$1500. When I called to ask what that was for, Chase told me they had to have a lawyer defend them against the liens since they held the mortgage on our house. I argued with them, pointing out that they also had title insurance that I paid for and that it should pay their legal fees, not me. They would not budge and I finally had to file a small claims case against them before they refunded my money. I refinanced as soon as I could after that, asked if I could waive escrow with the new mortgage, and have not had an escrow account since.
IÔÇÖve dropped escrow as well. No sense in them holding my money interest free. I donÔÇÖt even save it either. I just cash flow it with a paycheck when the taxes come due.
I live on long island and my escrow is with chase bank. ItÔÇÖs free service and they provide all activities information to me. If I change insurance or w/e, i just have to submit change under my chase acct. My account also has interest. What youÔÇÖre all saying should be ymmv and we donÔÇÖt know where OP is from.
I just got rid of my escrow with Mr. Cooper. I prefer to manage taxes and insurance on my own. I don’t see any downsides unless you don’t pay for insurance or taxes.
Manage your own escrow. When I did that something actually went down since they weren’t managing it. I can’t remember what ƒÿéƒÿé
the mortgage company would be responsible to eat any late payment fees made on any of the bills