Get Mortgage Escrow or Not?

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Gilberto de Piento
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Joined: Tue Nov 12, 2013 10:23 pm

Get Mortgage Escrow or Not?

Post by Gilberto de Piento »

Another mortgage question: Get mortgage escrow or not? Not getting it means the borrower is able to hold more of their money and invest it elsewhere for a period. Using escrow prevents the borrower from forgetting to pay for their taxes and insurance.

In case you aren't familiar with it, mortgage escrow is where the bank collects taxes and homeowner's insurance fees with each mortgage payment and pays the government and insurance company when needed.

Personally it feels like the interest from the money sitting in a checking account isn't going to amount to anything and I like the security of having the bank be responsible for taking care of the bills. It probably depends on the size of the mortgage and the escrow fee. I'll have to run some numbers sometime.

This is a good summary: https://clark.com/homes-real-estate/tru ... ow-paymen/.

Laura Ingalls
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Joined: Mon Jun 25, 2012 3:13 am

Re: Get Mortgage Escrow or Not?

Post by Laura Ingalls »

I have had the bank jack it up every time they have escrowed property taxes. I prefer to jack it up myself, :lol:

jacob
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Re: Get Mortgage Escrow or Not?

Post by jacob »

We pay RE taxes and insurance manually (we own the house). RE taxes come twice a year (we get a letter) and insurance (another letter) comes once. It's not hard.

I'm surprised escrow is optional insofar the home is mortgaged as the bank carries risk and wouldn't want to lose out if the home-"owner" somehow forgot the taxes (city takes the house) or the insurance (house burns down).

Fish
Posts: 570
Joined: Sun Jun 12, 2016 9:09 am

Re: Get Mortgage Escrow or Not?

Post by Fish »

As Jacob said, taxes and insurance are not hard. Having done it with and without escrow, I prefer making the payments myself.

In my experience, the escrow fee was negligible (something like $35 for the life of the mortgage). Because of required minimum reserves, your escrow balance will never drop below a threshold ($1-2k?) and that small fraction of your NW is tied up in escrow until the mortgage is repaid. One particular escrow service routinely botched the insurance payment, so every year I would get letters from the insurance co. regarding non-payment and loss of coverage :shock: until I made a few phone calls to straighten everything out. :x

George the original one
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Location: Wettest corner of Orygun

Re: Get Mortgage Escrow or Not?

Post by George the original one »

What Fish said. DIY is safest unless you have troubles paying bills when they come due.

Kriegsspiel
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Re: Get Mortgage Escrow or Not?

Post by Kriegsspiel »

Your lender may charge you more fees if you don't escrow. Just run the numbers.

IlliniDave
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Joined: Wed Apr 02, 2014 7:46 pm

Re: Get Mortgage Escrow or Not?

Post by IlliniDave »

I didn't have a choice when I bought my house, never had a problem with the escrow nor minded it all that much.

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