crosspost from Real Estate Board:

I'm below 80% LTV on my home so I'm thinking about requesting removing the Escrow account and letting me do my own taxes and insurance.

The plan is to modify my direct deposit such that my estimated T&I gets deposited into a separate online savings account so that I never see the money.

Anyone else do this? Is there a better place to park that money than a standard online savings acct?

TIA,
Jake

Directing the cash so that you don't see it is smart. I know people that went the route you are considering and didn't park the cash and always had an issue when tax time came. They finally wised up and parked it separate from their normal operating accounts.

Money market or online savings will typically yield 1-1.1% APY. Be sure to consider minimum account funding requirements if you plan to drain the account to near $0 every year.

I direct mine to the same money market that I keep the rest of my "cash/liquid" savings for short term emergencies, etc. I don't divert it immediately like you are, which is smart, but I do have an automated transfer set up for each month so that I don't get sloppy about it. I also divert much more than just my estimated taxes. Then as I monitor my overall short/medium/long-term investment savings, I work out of this account (but always keeping my emergency fund and property taxes in it).

That automated transfer/diversion is a great way to maintain consistent savings discipline. It trains you to live on less and helps keep you honest about it.

Don't disagree. When you consider the average balance of the taxes (50% of the FY payment) and the ridiculously low rates, the savings is very little. But setting up something that's automated eliminates the hassle factor, and I do think it's good discipline to get it out of your checking account.

I do this because my bank was really slow to adjust for property tax changes. I then had to pay more monthly to make up the shortage in escrow, made a PITA for budgeting when my monthly payments jumped around. If you have discipline, it's a good way to go.

I just escrow so I don't have to keep up with it.

We manage it ourselves. It causes less surprise payments from banks to deal with. We had it for a couple of years on our first home and the first year they gave us $3K back and the 2nd year they asked for $2500 to square back up. I didn't want to have to deal with that and don't have escrow on my 4 places.

I will say that some lenders will offer a better rate if you escrow which in that case I would consider it.

It does depend on your particular situation, but if you have a decent cash flow on a regular basis, and have access to an investment/savings account, I would keep it myself and invest it.

It is a riskier play, but the cash flow and extra money allows you to minimize the risk.

We manage ourselves after the first time that the escrow company screwed up the tax amount and overcharged us for months afterwards. They then chose to issue the refund directly to the principal.

No thanks, I'll manage it myself.

Imo if you have to split it out into a different account then you might as we just escrow

I pay myself. Banks mess it up all the time.

terradactylexpress said:

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Imo if you have to split it out into a different account then you might as we just escrow

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Disagree for the reasons aggiepaintrain and I listed. It took almost 4 months to correct my escrow issue (caused by the bank) and the result was that they kept the money anyway.

All I do is autodraft into a separate account and then the balance at the end of the year goes back into my checking. Took a 5 min call to set up. I can handle any issues with property taxes myself with 100x efficiency than a big bank.

IMO if you can't handle that money sitting in your account all year without spending it, your issues are bigger than escrow/not escrow.