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Mortgage and escrow

2,088 Views | 16 Replies | Last: 2 yr ago by MookieBlaylock
AggieStan
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Educate my ignorance..
- Say I currently pay mortgage monthly
- Also pay taxes in January , straight to County
- if I wanted to add taxes to mortgage, and it started in July. How does the mortgage company calculate ( the addl $$$) ?
jtraggie99
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AG
Why would you want to do this? What's the reasoning? I do the same and just stick my tax money in savings until it's due. At least I earn a tad bit of interest on it, as opposed to escrow, which gets me nothing.
wcb
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AG
They'll want to see your last bill. They'll pro-rate for where you are in the year, you'll send them a check, and everything going forward will go into escrow. Something like that.
Chipotlemonger
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AG
There is something to be said on ease of payments with this method. Not everyone is predisposed to set aside money somewhere for taxes.

I would post this on the Real Estate board, OP.
AgEng06
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AG
jtraggie99 said:

Why would you want to do this? What's the reasoning? I do the same and just stick my tax money in savings until it's due. At least I earn a tad bit of interest on it, as opposed to escrow, which gets me nothing.
This. Why lock yourself into a larger payment every month when you can instead have a lower monthly obligation and also have a pseudo "emergency fund" if needed throughout the year.
Ragoo
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AG
AgEng06 said:

jtraggie99 said:

Why would you want to do this? What's the reasoning? I do the same and just stick my tax money in savings until it's due. At least I earn a tad bit of interest on it, as opposed to escrow, which gets me nothing.
This. Why lock yourself into a larger payment every month when you can instead have a lower monthly obligation and also have a pseudo "emergency fund" if needed throughout the year.
because the obligation exists regardless? I don't escrow but others might want to for the discipline it forces.
John Francis Donaghy
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Also, keep in mind you won't just be paying your tax amount. They're going to want to overestimate your taxes and/or hold a couple thousand extra dollars of your money in the escrow account to make sure they have enough to cover if your tax bill ever comes in higher than expected.
YouBet
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AG
I escrow but it's been primarily because I've been too lazy to change it. Probably one of the few financial things I've done on auto pilot. I suspect I will change that here at some point and take control of that.
jagged
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AG
I've had a couple issues with escrow disbursements - one for insurance payment and one that was a timing issue during refinance.

I'm going to control my own destiny going forward b/c it's a pain to try to track down payments that you didn't make but are responsible for.
YouBet
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AG
jagged said:

I've had a couple issues with escrow disbursements - one for insurance payment and one that was a timing issue during refinance.

I'm going to control my own destiny going forward b/c it's a pain to try to track down payments that you didn't make but are responsible for.
Yes, we had same issue during a refinance and again when our loan was sold.
AgGrad99
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AG
YouBet said:

I escrow but it's been primarily because I've been too lazy to change it. Probably one of the few financial things I've done on auto pilot. I suspect I will change that here at some point and take control of that.


Same.

I could take it out and earn a few pennies in interest, but I chalk it up to a service I pay a tiny fee for. It's one less thing for me to keep up with.

That said, I do think it's smart to not lock yourself into the higher payment in case of emergency. That would really be the only benefit imo
SteveBott
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AG
If a July 7/12ths of your taxes and 2/12 as a cushion. Note you must have a minimum of 20% equity or the escrow is required. For VA and FHA you have to escrow no matter how much equity
coolerguy12
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AG
I got out of escrow because I got tired of having to fight them every year on getting the extra back. I spent more time dealing with that than I do now managing the monthly transfer and writing the tax checks. I just put the same amount they were withholding plus a little extra for flood insurance. That way when I finish paying my taxes in January I usually have $800-$1000 left over that I throw into the vacation account to get it started for the year.

It was such a pain to get out of escrow, I can't imagine why anyone would get into it on purpose if they aren't already.
SteveBott
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AG
By federal law the lender can keep a two month cushion. You ain't getting that back. The lender will do an annual account review and ask you to make up the shortage or refund any extra over the cushion. If you cannot make up the shortage with one payment they will add XX to you payments the rest of the year to make it up.

Reviews are around March and April
hph6203
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AG
coolerguy12 said:

I got out of escrow because I got tired of having to fight them every year on getting the extra back. I spent more time dealing with that than I do now managing the monthly transfer and writing the tax checks. I just put the same amount they were withholding plus a little extra for flood insurance. That way when I finish paying my taxes in January I usually have $800-$1000 left over that I throw into the vacation account to get it started for the year.

It was such a pain to get out of escrow, I can't imagine why anyone would get into it on purpose if they aren't already.
You wasted your time. A re-analysis is required annually and when an analysis shows an overage the mortgage servicer has to send the funds within 30 days. You fought to get money a couple of weeks early, and in all reality probably got it at the same time as you otherwise would have.

They do the analysis later than you want to ensure they get all the taxes paid prior to bulk analysis being done for every property in a state, and to ensure they catch as many delinquent tax accounts so they aren't done on an off cycle basis/twice in a single 12 month period.
aTm2004
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AG
jtraggie99 said:

Why would you want to do this? What's the reasoning? I do the same and just stick my tax money in savings until it's due. At least I earn a tad bit of interest on it, as opposed to escrow, which gets me nothing.

This. We set aside a set amount each month that goes into a "house" account that is to cover taxes, insurance, and HOA. We usually have a little left at the beginning of the year, so we leave it for any repairs that may come up and let it build. We just have a set amount deposited straight from a couple paychecks into it so we aren't even having to make a manual transfer or see the money...kind of like the other taxes we have ripped from us.
coolerguy12
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AG
That may be but fighting it is what made me realize they were always going to carry 2 months extra in the account. I didn't like that.
MookieBlaylock
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AG
If you are free from escrow why go back?

You paid a fee to get out of it
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