Escrow waiver fee--worth paying?

[roadtripper]

Hi budget board finance people! Looking for advice and experience:
I just got my escrow adjustment for next year, and my mortgage is going up by almost 300 dollars a month . Apparently we are now in a flood plain, so they want to escrow flood insurance, and my property taxes have gone up too (as my home value has declined--but I'm tackling that issue separately). Paying the higher mortgage isn't really the issue (thankfully), but I get annoyed by all these escrow adjustments based on some average that needs to be in my account.

My question: I want to get an escrow waiver so that I can pay my city taxes, homeowners, and flood insurance by credit card to earn Rapid Rewards points. The bank wants to charge me hundreds of dollars (.25% of the loan)to give me my own money back. I guess that's standard practice, but I want to know if it's worth it for some potential free flights on Southwest. Anyone out there bite the bullet and pay the fee so that they can be in charge of their own money?

 

[DisneyCowgirl]

Hi budget board finance people! Looking for advice and experience:
I just got my escrow adjustment for next year, and my mortgage is going up by almost 300 dollars a month . Apparently we are now in a flood plain, so they want to escrow flood insurance, and my property taxes have gone up too (as my home value has declined--but I'm tackling that issue separately). Paying the higher mortgage isn't really the issue (thankfully), but I get annoyed by all these escrow adjustments based on some average that needs to be in my account.

My question: I want to get an escrow waiver so that I can pay my city taxes, homeowners, and flood insurance by credit card to earn Rapid Rewards points. The bank wants to charge me hundreds of dollars (.25% of the loan)to give me my own money back. I guess that's standard practice, but I want to know if it's worth it for some potential free flights on Southwest. Anyone out there bite the bullet and pay the fee so that they can be in charge of their own money?

Are you able to pay all those things with a credit card without incurring any fees? How many points are you able to get by doing that? Does that translate to a dolalr value of Southwest tickets that makes it worthwhile to pay the mortgage company the fee?

 

[Praying Colonel]

Hi budget board finance people! Looking for advice and experience:
I just got my escrow adjustment for next year, and my mortgage is going up by almost 300 dollars a month . Apparently we are now in a flood plain, so they want to escrow flood insurance, and my property taxes have gone up too (as my home value has declined--but I'm tackling that issue separately). Paying the higher mortgage isn't really the issue (thankfully), but I get annoyed by all these escrow adjustments based on some average that needs to be in my account.

My question: I want to get an escrow waiver so that I can pay my city taxes, homeowners, and flood insurance by credit card to earn Rapid Rewards points. The bank wants to charge me hundreds of dollars (.25% of the loan)to give me my own money back. I guess that's standard practice, but I want to know if it's worth it for some potential free flights on Southwest. Anyone out there bite the bullet and pay the fee so that they can be in charge of their own money?

I've not done it, but it seems what you'd want to do is calculate how much per year the bank's fee would be, then calculate how many points per year you would earn through Southwest and how much $ that translates to in terms of free flights. That gives you an idea of the "break even" point and whether it makes sense financially.

 

[GrnMtnMan]

I paid to waive escrow of taxes and insurance when I originated the loan.

Whether or not it will be a good deal depends on so many things that it's almost impossible to calculate. You have to think about how long you'll have the loan, what you can do with the money that would have been in a escrow account, and what is going to happen to interest rates in the future.

In my case, I paid because I'd rather have more control over my homeowners insurance (like changing carriers mid-policy) and pay the premium with a credit card. And no need to have to deal with a faceless customer service rep when the mortgage company screws up some payment.

Don't do it if you ever struggle to make ends-meet. You do not want tax lien on your home. You have to have adequate savings to pay the taxes should you be unemployed for an extended period - like years.

 

[seashoreCM]

deleted

 

[ancestry]

I was always under the impression that to escrow or not to escrow had to be decided when you took out the loan. We don't escrow but we insisted on that when we got our mortgage. I don't think you can change once you are into the mortgage because it is part of your loan documents, if that makes sense.

 

[paladin]

I was always under the impression that to escrow or not to escrow had to be decided when you took out the loan. We don't escrow but we insisted on that when we got our mortgage. I don't think you can change once you are into the mortgage because it is part of your loan documents, if that makes sense.

No, at least not for us. We started out escrowing, but then changed it after a bit (I don't remember how long; maybe 2 years).

 

[Sadie22]

We assumed the first mortgage we ever had since it had what was a low rate for that time (something like 12% -- and people think we have it tough these days). The mortgage came with an escrow. After a problem with payment of taxes and/or insurance when the mortgage was purchased by another entity, we resolved never to have another escrow account once that mortgage was paid off. We have owned other homes since then and never another escrow account. So yes, we have paid the one-time charge in order not to have to deal with escrowing property taxes and homeowners' insurance each time we have taken out a new mortgage. We prefer to pay these items ourselves. There's no problem with overage or underage in an escrow account this way, either.

 

[scrapquitler]

My question: I want to get an escrow waiver so that I can pay my city taxes, homeowners, and flood insurance by credit card to earn Rapid Rewards points. QUOTE]

Before you do anything, check with your local authorities to find out if this is a good plan....my town charges you a 'convenience fee' to pay with credit card (it's like 4.5% ) and my homeowners insurance company doesn't accept credit card payments. If you have to pay the fee, that is going to wipe out any rewards you earn.

 

[divabydisney]

I work in mortgage. First confirm they will allow you to do this. When I used to do escrow, the rule of thumb is you escrow all or nothing. The flood insurance requirement was forced to be escrowed so everything had to be. That may have changed and certainly banks can make their own policies but just make sure you double-check. Additionally, they also had the stipulation that your LTV had to be at or below 80%. Again see if there are any clauses to that. We would make you pay for an appraisal if you thought your LTV was in guidelines. That being said, I would never pay to waive escrow.

 

[roadtripper]

Thanks for all the replies! Here are some clarifications:

No fee to pay homeowners, flood, with cc; city charges a flat 3 dollars per transaction (not a percent).

We can change to no escrow acc. to the mortgage company; those who refuse escrow at closing simply have that fee rolled into their closing costs or pay a higher interest rate (these banking guys get their money no matter what).

the fee is a one time fee

We meet the 80% LTV acc. to a recent 2009 re-fi with appraisal (although with home values falling, probably not really). So it sounds like I would need to pay for a new appraisal on top of everything else? UGH. So fed up with banks right now!

We have great credit (in the 800s) but I guess that doesn't matter. Thanks for the advice everyone--looks like it's not worth it, which I think is what they want me to conclude.

 

[ShelsGoingToDisney]

I haven't sat and done figures to see if it paid off or not but when we got our loan in 2004 we paid $400 to not have an escrow. I set up a separate ING savings acct and make an automatic deposit once a month to pay for insurance and taxes. I have made a little interest off of that over the years. I do use my rewards CC to pay the insurance since it is allowed but I don't for the property taxes because the courthouse charges a 3% fee to use a CC so not at all worth it for the rewards there! Sure wish I could though because our taxes are high!

The main reason I did it though was because I wanted to have control and not have a bunch of extra "padding" in an account that is earning someone else interest! We had some bad experiences with an escrow acct on our last house and I didn't want to have that happen again.

 

[Weluvdisny]

I work for a local bank and sit here speechless to think that other banks charge such a high fee to not escrow. We charge our customers a one-time fee of $78 at closing, only because we have to order an annual tax search to see if taxes stay current on the loan.

We do require an escrow if you are in a flood zone and need to get flood insurance. But if you don't need flood and just want to escrow taxes and not homeowners, we are ok with that.

No wonder why the government is getting so strick with all the paperwork we have to complete for closings. The banks are nickel and diming everyone with fees that don't need to be charged.

Sorry for your dilemma. I hope you are able to work it out with minimal out of pocket expense.

 

[QVCshopper]

It doesn't sound worth it to me. Plus, your $3 fee could easily increase at any time (my borough changes their water, trash, and sewer rates whenever they want) making your situation a mute point. Oh, and we do not escrow, either.

 

[hsmamato2]

will they do this if a homeowner is currently paying off back taxes? just wondering.....

 

[diesel]

I don’t know about the waiver fee but wanted to comment on the flood zone issue. I am also in MA and was told by my mortgage company back in May that I needed to get flood insurance (about $2,400/year) because I was now in a flood zone. Our house is on a hill and would never flood even in the worst of rains so I was confused. Now a piece of our property is in the flood zone but it is not near our house and we have not been required to get flood insurance by our mortgage company in the past. I was able to get the flood zone map from my town website and also from FEMA. It showed the flood zone of our property but our house was not located in the flood zone only a small portion of our property. We have 4 acres and the property is shaped like a rectangle. The house is at one end of the rectangle and the flood zone is at the bottom of the rectangle. I was able to show this information to our mortgage company and they agreed that we did not need flood insurance. So do some research if you don’t think that the information is correct about being in a flood zone.

 

[puffkin]

In your case, it doesn't sound worth it unfortunately.

We had a bad experience with escrow. Our taxes went up about $100/mo. During that time, we had successfully appealed our home appraisal which basically wiped out the $100/mo increase. We were also both unemployed at the time so that money really could have helped. Due to the way the escrow was calculated, we did not see a relief in our monthly payment for a whole year. At which point they did refund us the overage we paid. IT was just a shame because we had NO control over our money!

We just refinanced last month and our lender does not charge us anything to NOT escrow. So we decided to take control of our own money. I set up a serperate ING account to deposit my escrow payment in each month. That way I can increase or decrease it immediately if I know of a tax increase or something like that. Not to mention at least I will earn a tiny bit of interest on the money rather than them.