Do you escrow your property taxes and/or homeowner's insurance?

[daughtersrus]

The tax refund topic reminded me about a discussion that I've had with some friends. They think it's crazy for people to lend money to the government but they pay the mortgage company extra money each month for their property taxes and homeowner's insurance.


I get a refund from the IRS every year but I do not use an escrow account.

 

[pyrxtc]

but each is totally different. You are giving your mortgage company money to pay a bill. yes you are paying each month but it is for a bill. You don't over pay them on purpose. With taxes, you give the government money each month to pay a bill. Some people over pay their taxes to the government to get money back. I would never over pay for my property taxes or insurance.

 

[angierae]

We do, and it doesn't bother me in the least. I don't have to worry about taxes/insurance, and considering that I earned under $10 in interest in my Disney fund account last year, it's not like if I had that money sitting in savings I'd be making mad bank in interest.

It's way easier for me to write a slightly bigger check every month and not worry about taxes and insurance.

 

[Swimalie]

I don't now and I never will escrow. To me I don't want to give money to my bank which could be earning me interest and hope that the bank has figured out my taxes right year after year, when they change every year. When I go for a mortgage, I will not use a company that requires escrow.

 

[ilovemk76]

The tax refund topic reminded me about a discussion that I've had with some friends. They think it's crazy for people to lend money to the government but they pay the mortgage company extra money each month for their property taxes and homeowner's insurance.


I get a refund from the IRS every year but I do not use an escrow account.

I did not escrow my insurance and taxes. I pay my taxes early to get the 2% discount. That is a 2% discount for just a month early payment. That IS a great return on my investment. My neighbor does not get the discount because her bank does not send in the taxes during the discount time. They have no incentive.

It is the same as giving the government a interest free loan.

 

[Shanna-like-Banana]

We escrow and I don't like it all that much .

Our 1st mortage that we had we choose not to escrow, we decided to put that money in a short term CD and earn the interest

This current mortage we have requires us to escrow, so we do.

But I'd rather have my money where I want it, on my own terms.

 

[pixiewings71]

We have an escrow account, we prefer it that way. Our escrow account does earn interest......

 

[indimom]

No. We pay our own taxes and insurance. We heard too many stories of payments being late or not paid and didn't want to deal with a middleman.

 

[scrapquitler]

The tax refund topic reminded me about a discussion that I've had with some friends. They think it's crazy for people to lend money to the government but they pay the mortgage company extra money each month for their property taxes and homeowner's insurance.


I get a refund from the IRS every year but I do not use an escrow account.

Escrow is a required part of our mortgage. I do earn interest (and pay tax on the interest $ earned on the money in the escrow account.

 

[Crystal824]

I don't overpay my income taxes but I do escrow my property taxes and insurance. I wasn't super happy about doing it, but the mortgage copany required it. It was our first mortgage, which we got right after the credit crunch so we were ok with it.

 

[sam_gordon]

but each is totally different. You are giving your mortgage company money to pay a bill. yes you are paying each month but it is for a bill. You don't over pay them on purpose. With taxes, you give the government money each month to pay a bill. Some people over pay their taxes to the government to get money back. I would never over pay for my property taxes or insurance.

We escrow. Our escrow accounts (3 or 4 different lenders over the last 18 years or so) have all required a "minimum" level of escrow amount (so even after they pay the bills there's some left over). So yes, we are over paying them on purpose.

But then again, I also don't see a problem with a SMALL (ie: ~$1K or lower) tax refund.

The reason I consider that small is the math. Just to keep it simple, let's say you get a $1200 tax refund. That's an extra $100/month you could get in your paycheck. $50 extra each paycheck (based on bi-weekly checks). If you invested that money, you'd get an extra $50 from interest on a 5% account (try to find something giving you 5%).

 

[daughtersrus]

but each is totally different. You are giving your mortgage company money to pay a bill. yes you are paying each month but it is for a bill. You don't over pay them on purpose. With taxes, you give the government money each month to pay a bill. Some people over pay their taxes to the government to get money back. I would never over pay for my property taxes or insurance.

Yes, it's for a bill but the bill is not due every month. If you took the amount that you escrow and put it in your own bank account, you would be earning interest on that money, not the mortgage company. Instead, you are giving the mortgage company your money interest free many months. I know a lot of people that get money refunded to them because there was an overage in the escrow account.

It really isn't any different than giving the IRS too much money every month.

Edited to add...Typical escrow payments here are around $1,000/month. That covers property taxes and insurance only, not the mortgage.

 

[angierae]

Yes, it's for a bill but the bill is not due every month. If you took the amount that you escrow and put it in your own bank account, you would be earning interest on that money, not the mortgage company. Instead, you are giving the mortgage company your money interest free many months. I know a lot of people that get money refunded to them because there was an overage in the escrow account.

It really isn't any different than giving the IRS too much money every month.

Edited to add...Typical escrow payments here are around $1,000/month. That covers property taxes and insurance only, not the mortgage.

As someone pointed out, you DO get the interest your escrow account earns.

 

[daughtersrus]

As someone pointed out, you DO get the interest your escrow account earns.

That is not always true. Only a few states have laws that require interest to be paid on escrow accounts.

Also, the money is tied up and is not readily available in case of emergency.

 

[herdtoDisney]

Any mortgage I've had, they require an escrow. Mine is for taxes and insurance. It's to protect the lender's interest in the property. My account does pay interest, a whopping $24 this past year

 

[mikehn]

many mortgage companies require an escrow and that is to ensure that the taxes and insurance are paid to protect their interest. having said that, they do pay interest on an escrow balance. At the end of the year, they send you a 1099 showing you the interest you earned so you can pay taxes on it.

 

[mrodgers]

many mortgage companies require an escrow and that is to ensure that the taxes and insurance are paid to protect their interest. having said that, they do pay interest on an escrow balance. At the end of the year, they send you a 1099 showing you the interest you earned so you can pay taxes on it.

As was said, not all do. I refinanced and sat waiting for the 1099 from the new mortgage. When I finally called to ask, their response sounded like they thought I was insane thinking my escrow would collect interest.

Yes, I have to escrow as condition of the loan.

 

[timmac]

There is a difference though, and I agree with PPs who have pointed out that money put aside for a bill is very different than money that is to do with as you please. It's not just the (minimal) interest that is the difference, but rather the buying power of the money (in the best case) or the interest that could have been avoided (in the worst case).

In the case of escrow, it's money that, one way or another, would ultimately go to pay a tax bill. The only thing lost is the interest. (and that's not even always true)

In the case of overpayment to the IRS, it's money that may ultimately be spent on something. If it's spent to pay off a bill/CC/etc, then there's accumulated interest and/or fees that could have been avoided. If it's spent on consumer purchases, or similar, then the reality of inflation kicks in... the money you get back as a refund is--on average-- 8 months old. In a year with 3% inflation (for example), that means it's lost (nearly) 2% of it's value.

 

[Ryansdad0727]

I had an escrow account but when i refinanced i specifically asked them to not do an escrow. I set aside the money each month and pay it myself. I like to control my own money as much as possible.

 

[Judique]

The tax refund topic reminded me about a discussion that I've had with some friends. They think it's crazy for people to lend money to the government but they pay the mortgage company extra money each month for their property taxes and homeowner's insurance.


I get a refund from the IRS every year but I do not use an escrow account.

I try really hard not to owe or get a refund. One year it was exactly 1 dollar owed!

We do an escrow account and it is required. There is no bonus for paying early, but there is a penalty for paying late (property taxes). One prior mortgage company paid late and they had to credit the amount back to us after the fact.

In Md, Banks, and Savings and Loan banks are required to pay interest on escrow accts.

In Maryland if the loan has not been sold though fannie, freddie or ginnie to an out of state lender, who in turn services from out of state, the (in state) lender has to pay interest - 3% or what is paid on a regular savings account.

I prefer doing escrow.