Is it Wise to Remove Escrow if Bank Allows it?

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changingtimes
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by changingtimes » Wed Jun 05, 2019 2:56 pm

F150HD wrote:
Wed Jun 05, 2019 1:38 pm
some lenders require it (for ins or taxes or both).
Just wrote to mine and they didn't out-and-out refuse. Said that they will pass on my request to their Escrow Department, who will make the ultimate determination after reviewing my account.

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corn18
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by corn18 » Wed Jun 05, 2019 3:59 pm

changingtimes wrote:
Wed Jun 05, 2019 2:56 pm
F150HD wrote:
Wed Jun 05, 2019 1:38 pm
some lenders require it (for ins or taxes or both).
Just wrote to mine and they didn't out-and-out refuse. Said that they will pass on my request to their Escrow Department, who will make the ultimate determination after reviewing my account.
THat's what Chase said to me as well. Waiting to hear what they decide.
Don't do something, just stand there!

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changingtimes
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by changingtimes » Wed Jun 05, 2019 4:04 pm

corn18 wrote:
Wed Jun 05, 2019 3:59 pm
changingtimes wrote:
Wed Jun 05, 2019 2:56 pm
F150HD wrote:
Wed Jun 05, 2019 1:38 pm
some lenders require it (for ins or taxes or both).
Just wrote to mine and they didn't out-and-out refuse. Said that they will pass on my request to their Escrow Department, who will make the ultimate determination after reviewing my account.
THat's what Chase said to me as well. Waiting to hear what they decide.
It was Chase for me, too! They must be curious about the influx. 😁

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willthrill81
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by willthrill81 » Wed Jun 05, 2019 5:03 pm

corn18 wrote:
Wed Jun 05, 2019 3:59 pm
changingtimes wrote:
Wed Jun 05, 2019 2:56 pm
F150HD wrote:
Wed Jun 05, 2019 1:38 pm
some lenders require it (for ins or taxes or both).
Just wrote to mine and they didn't out-and-out refuse. Said that they will pass on my request to their Escrow Department, who will make the ultimate determination after reviewing my account.
THat's what Chase said to me as well. Waiting to hear what they decide.
Our mortgage is with Homestreet Bank, but I discovered today that they merely service it and that Fannie Mae actually owns it. We're awaiting the results of our request to drop escrow, which I hope that they will. Our LTV is only about 14% right now.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

drg02b
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by drg02b » Wed Jun 05, 2019 9:28 pm

My mortgage is through a local credit union. Three of the last four times, they've failed to make a timely insurance payment and I had to notify them a few days before the due date. I've asked every time to be able to cancel the escrow, but they refuse. Most credit unions are pretty inefficient and antiquated with their policies.

DivesEtPauper
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by DivesEtPauper » Wed Jun 05, 2019 9:31 pm

If I may, here's a little story about how/why I will never borrow/refinance with escrow. (It's also the story of how I will never, ever do business with U.S. Bank again.)

When I originally bought my house, I knew very little about escrow. I now know (as others have pointed out) that it's just a way to "automate" three payments - two bi-annual property tax bills, and one annual homeowners insurance bill. Also, as a part of my original loan, I had to pay PMI.

Over the years, my home loan was bought/sold, and I eventually ended up as a customer of U.S. Bank, not by choice. At some point, U.S. Bank offered to refinance my mortgage. The rate was significantly lower, and there were no closing costs. I was also told - and this is very important - that this refi would eliminate the need for PMI.

Within a year I was notified that my escrow balance was too low, and that I would need to pay extra to keep the balance high enough. Digging into things more, I discovered that U.S. Bank had been withdrawing monthly PMI fees from my escrow account - PMI fees that I was told I wouldn't need to pay. My escrow account was too low because they kept taking money from it that they shouldn't have!

After much back and forth to get my money back into my escrow account, U.S. Bank finally acknowledged that my PMI was "under-disclosed" (their term, weasel word for "we lied", IMO), but claimed they couldn't just stop taking my money. Instead, they added a "supplemental reserve" amount to my account, and each month proceeded to add in the PMI and then withdraw it.

Inexplicably, they continued to send me annual "your escrow is going to be too low" notices while trying to raise my payment. Occasionally, they would randomly lower the supplemental reserve amount, and then play dumb when I called them on it. I can't even keep track of how many "Escrow: Here's How it Works" pamphlets they sent to me.

Fortunately, not long after the ordeal, I found a great opportunity to refinance with much better terms at a different lender - no escrow, no PMI, no more U.S. Bank.

I would never choose a lender that requires escrow, and I will absolutely never do business with U.S. Bank.

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corn18
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by corn18 » Thu Jun 06, 2019 9:10 am

Just heard back from Chase and my request to drop escrow was approved! $7k headed my way. Insurance comes out monthly with my auto policy. Taxes are due once a year in Feb. I like this a lot so far.
Don't do something, just stand there!

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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by new2bogle » Thu Jun 06, 2019 10:20 am

Admiral wrote:
Wed Jun 05, 2019 11:52 am
Devil's Advocate: I don't mind escrow one bit. The interest I might earn is immaterial to be. It's one (or two) fewer bills to worry about, and, I don't need to think about putting $x aside each month. It's easy and tempting to spend those dollars when they're not needed for 11 months. "I'll just pay myself back later" is easy to use to justify spending the money.

I've owned home for 20+ years and the mortgage servicer has never missed or sent an incorrect payment for insurance or taxes. Not to say it hasn't happened to others.

I would not say it's wise or unwise. It's personal preference.
I agree with this. I have escrow on my rental (but not on my primary) house. PenFed has never made a mistake and the extra interest ($95 at 2%) is not worth it to me. Now if PenFed screws up even once, then certainly I will not escrow anymore.

SC Anteater
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by SC Anteater » Thu Jun 06, 2019 10:52 am

Admiral wrote:
Wed Jun 05, 2019 11:52 am
Devil's Advocate: I don't mind escrow one bit. The interest I might earn is immaterial to be. It's one (or two) fewer bills to worry about, and, I don't need to think about putting $x aside each month. It's easy and tempting to spend those dollars when they're not needed for 11 months. "I'll just pay myself back later" is easy to use to justify spending the money.

I've owned home for 20+ years and the mortgage servicer has never missed or sent an incorrect payment for insurance or taxes. Not to say it hasn't happened to others.

I would not say it's wise or unwise. It's personal preference.
I essentially 'self-escrow'. Capital One allows you to set up as many savings accounts as you want, so I set up on specifically for property taxes and have 1/12 of the tax due transferred to this account each month automatically. No need to remember anything.

I don't do this for insurance because the bill isn't high enough to warrant it.

IMhooked
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by IMhooked » Thu Jun 06, 2019 11:02 am

Ditched escrow ASAP. Have a separate online high interest savings account for it. Some years we have on-going contributions to it, other years we lump sum it depending on goals/plans for the year.

The control factor--It's my money until it's yours

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changingtimes
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by changingtimes » Thu Jun 06, 2019 11:11 am

corn18 wrote:
Thu Jun 06, 2019 9:10 am
Just heard back from Chase and my request to drop escrow was approved! $7k headed my way. Insurance comes out monthly with my auto policy. Taxes are due once a year in Feb. I like this a lot so far.
Dang, we both pretty much asked at the same time, and I'm still waiting. Wonder if my credit freeze is slowing them down.

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corn18
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by corn18 » Thu Jun 06, 2019 11:37 am

changingtimes wrote:
Thu Jun 06, 2019 11:11 am
corn18 wrote:
Thu Jun 06, 2019 9:10 am
Just heard back from Chase and my request to drop escrow was approved! $7k headed my way. Insurance comes out monthly with my auto policy. Taxes are due once a year in Feb. I like this a lot so far.
Dang, we both pretty much asked at the same time, and I'm still waiting. Wonder if my credit freeze is slowing them down.
I had to call Chase and ask them. Otherwise I would have been waiting for a letter to get here. Give them a call and check the status.
Don't do something, just stand there!

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changingtimes
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by changingtimes » Thu Jun 06, 2019 11:38 am

corn18 wrote:
Thu Jun 06, 2019 11:37 am
changingtimes wrote:
Thu Jun 06, 2019 11:11 am
corn18 wrote:
Thu Jun 06, 2019 9:10 am
Just heard back from Chase and my request to drop escrow was approved! $7k headed my way. Insurance comes out monthly with my auto policy. Taxes are due once a year in Feb. I like this a lot so far.
Dang, we both pretty much asked at the same time, and I'm still waiting. Wonder if my credit freeze is slowing them down.
I had to call Chase and ask them. Otherwise I would have been waiting for a letter to get here. Give them a call and check the status.
I just keep checking my online account to see if the next payment due has changed. I hate phones. :)

DaftInvestor
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by DaftInvestor » Thu Jun 06, 2019 11:58 am

Got rid of it when my mortgage company kept failing to pay my home-owners insurance almost resulting in cancellation of the policy. They also paid my tax-bill late resulting in extra fees (they didn't care - they just paid the fees out of my escrow).
After dealing with them paying my bills late I had them cancel the escrow account and paid the bills myself.
I'd get rid of it as soon as you can and pay your bills directly.

autolycus
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by autolycus » Thu Jun 06, 2019 1:21 pm

DivesEtPauper wrote:
Wed Jun 05, 2019 9:31 pm
two bi-annual property tax bills
Pet peeve of mine... Unless you're paying property taxes once every 2 years, you should be saying semi-annual. I know that common usage in American English has created a second meaning for "bi-annual", "bi-monthly", etc., but it is really an incorrect usage that causes unnecessary ambiguity, even if it has become accepted. "Bi" means 2. "Semi" means half. Bi-annual = every 2 years. Semi-annual = every half year.

MrSarcasm
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by MrSarcasm » Thu Jun 06, 2019 2:20 pm

I've been meaning to get around to this, but was dreading the process.

Just called Wells Fargo's mortgage team, and in less than 10 minutes I was able to remove escrow and recast my mortgage with no fee. The recast did require a principal payment.

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changingtimes
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by changingtimes » Tue Jun 11, 2019 5:43 am

Just a follow-up that Chase approved my request to remove escrow. Thanks for the nudge from this thread! (and also thanks for nudging after my homeowner's insurance was already paid this year!)

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beyou
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by beyou » Tue Jun 11, 2019 12:50 pm

Long ago paid upfront points to eliminate escrow from day 1 of my mortgage.
Never have paid escrow, worth the peace of mind not having to deal with a middle man.

fabdog
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by fabdog » Tue Jun 11, 2019 1:07 pm

by alpenglow » Wed Jun 05, 2019 11:13 am

CAsage wrote: ↑
Tue Jun 04, 2019 4:04 pm
Another really good reason to control your own Property Tax payments is the option to "bunch" that deduction every other year, should that allow you to itemize. Works in some circumstances, especially if you are close to the standard deduction....

I'm in NY and my taxes are about $15k. Just recently started bunching to get the standard deduction ($16k) one year followed by the bunched $30k deduction the next. Not worth a ton of money, but after accounting for lost interest, I'm up about $750 per cycle. I'll take it.
Can you help me by explaining how you get $30K in property taxes deducted vs the $10K state and local income taxes limitation? If you have found a workaround I would love to know about it

Thanks

Mike

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Meaty
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by Meaty » Tue Jun 11, 2019 1:13 pm

bigtex wrote:
Tue Jun 04, 2019 2:42 pm
What do bogleheads do concerning escrow? Do you get rid of it as soon as your able to allow greater flexibility? Or do you keep it as its two less bills to keep track of (RE taxes & Home Ins.)?
Just one thing to consider- some states require lenders to provide interest on escrow accounts; often far higher than online savings accounts (6% is an example)
"Discipline equals Freedom" - Jocko Willink

teamDE
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by teamDE » Tue Jun 11, 2019 1:18 pm

Wow, I've never considered removing escrew. Literally never thought about it. I'd love to!
MrSarcasm wrote:
Thu Jun 06, 2019 2:20 pm
I've been meaning to get around to this, but was dreading the process.

Just called Wells Fargo's mortgage team, and in less than 10 minutes I was able to remove escrow and recast my mortgage with no fee. The recast did require a principal payment.
I also have a Wells Fargo mortgage. I don't seem to be receiving any interest on my escrow. I'm in MA where i think its required by law. Did you receive interest? Where are you?

MnD
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by MnD » Tue Jun 11, 2019 1:43 pm

I'd dump it.
I don't recall being paid any interest back when on escrow, so that's a current 2.x% interest advantage to self-bank and self-pay.
Prior to tax reform I was bunching property taxes every other year that allowed us to itemize every other year. Good luck doing that through your lender. Our home insurer takes credit cards without fee so I bag a nice discount there with a reward credit card.

Ron Ronnerson
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by Ron Ronnerson » Tue Jun 11, 2019 3:46 pm

I don’t have an escrow account either. We open up two credit cards offering bonuses around the time that property taxes are due to pay the two installments. Even after accounting for the processing fee for paying with a credit card, we earn about $1k in rewards per year, effectively lowering our property taxes by this amount. The minimum spending amount to earn the bonus on the credit card is met with one transaction.

There is also flexibility in timing payments. For example, I’ve made 3 installments in some years and only 1 in others based on our tax situation.

I also earn 4% interest on savings at a credit union and likely would get less on an escrow account.

Lastly, the chance of a payment being missed and headaches arising as a result are reduced by maintaining control myself.

teamDE
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by teamDE » Tue Jun 11, 2019 4:52 pm

teamDE wrote:
Tue Jun 11, 2019 1:18 pm
Wow, I've never considered removing escrew. Literally never thought about it. I'd love to!
MrSarcasm wrote:
Thu Jun 06, 2019 2:20 pm
I've been meaning to get around to this, but was dreading the process.

Just called Wells Fargo's mortgage team, and in less than 10 minutes I was able to remove escrow and recast my mortgage with no fee. The recast did require a principal payment.
I also have a Wells Fargo mortgage. I don't seem to be receiving any interest on my escrow. I'm in MA where i think its required by law. Did you receive interest? Where are you?
Follow up: called and 5min later it was gone. I forgot to ask about interest...

fund
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by fund » Tue Jun 11, 2019 5:12 pm

autolycus wrote:
Thu Jun 06, 2019 1:21 pm
DivesEtPauper wrote:
Wed Jun 05, 2019 9:31 pm
two bi-annual property tax bills
Pet peeve of mine... Unless you're paying property taxes once every 2 years, you should be saying semi-annual. I know that common usage in American English has created a second meaning for "bi-annual", "bi-monthly", etc., but it is really an incorrect usage that causes unnecessary ambiguity, even if it has become accepted. "Bi" means 2. "Semi" means half. Bi-annual = every 2 years. Semi-annual = every half year.
Agree it can be confusing, and common usage has conflated "biannual" with "biennial". Biannual properly means twice per year, though as you note it's taken on a second meaning, with ambiguity as a result. Biennial properly means once every two years.

Back on point: we don't escrow. Yes, the bank paid interest, but it was quite nominal and nothing to get excited about. Meanwhile they were required to keep a two month cushion or buffer and that meant we lost access to and use of that money. So we figured because we have to pay the bill one way or the other, we might as well just budget for it and take care of it ourselves. Takes only a couple of minutes to log on to the county website and pay the bill.

MrSarcasm
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by MrSarcasm » Wed Jun 12, 2019 9:39 am

teamDE wrote:
Tue Jun 11, 2019 1:18 pm
Wow, I've never considered removing escrew. Literally never thought about it. I'd love to!
MrSarcasm wrote:
Thu Jun 06, 2019 2:20 pm
I've been meaning to get around to this, but was dreading the process.

Just called Wells Fargo's mortgage team, and in less than 10 minutes I was able to remove escrow and recast my mortgage with no fee. The recast did require a principal payment.
I also have a Wells Fargo mortgage. I don't seem to be receiving any interest on my escrow. I'm in MA where i think its required by law. Did you receive interest? Where are you?
I'm in Texas and was not getting interest on escrow. Banks will offer you a lower rate if you let them hold your escrow because they can make a little bit on that money.

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dm200
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by dm200 » Wed Jun 12, 2019 9:58 am

Agree it can be confusing, and common usage has conflated "biannual" with "biennial". Biannual properly means twice per year, though as you note it's taken on a second meaning, with ambiguity as a result. Biennial properly means once every two years
Yes! Sometimes such terms are so misused that the meaning changes!

I prefer the term "semi-annual" to mean twice a year. :sharebeer

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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by TropikThunder » Wed Jun 12, 2019 1:09 pm

fabdog wrote:
Tue Jun 11, 2019 1:07 pm
by alpenglow » Wed Jun 05, 2019 11:13 am

CAsage wrote: ↑
Tue Jun 04, 2019 4:04 pm
Another really good reason to control your own Property Tax payments is the option to "bunch" that deduction every other year, should that allow you to itemize. Works in some circumstances, especially if you are close to the standard deduction....

I'm in NY and my taxes are about $15k. Just recently started bunching to get the standard deduction ($16k) one year followed by the bunched $30k deduction the next. Not worth a ton of money, but after accounting for lost interest, I'm up about $750 per cycle. I'll take it.
Can you help me by explaining how you get $30K in property taxes deducted vs the $10K state and local income taxes limitation? If you have found a workaround I would love to know about it

Thanks

Mike
I was wondering that too. Also there were several threads earlier about how taxing authorities wouldn’t accept pre-payments, and a debate on whether one could claim a deduction for a tax that wasn’t due yet (if you were able to pre-pay it).

“Just recently started”?! You could have been doing that in the past, but I don’t se any way to claim $30,000 in property tax deductions under the new tax law.

fennewaldaj
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by fennewaldaj » Thu Jun 13, 2019 12:17 am

Funny I am kinda the opposite of most in this thread. I will miss escrow when the house is paid off. One less thing to worry about. My total insurance bill + property taxes is only ~$3600 so I don't feel like I am missing much by not earning interest on that.

BogleLearner
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by BogleLearner » Thu Jun 13, 2019 10:05 am

We have never had an escrow. The bank actually tried to sneak in a signature paper for escrow during closing.
I have known of houses on the auction block for non-payment of real estate taxes by a mortgage lender.
By all means, get rid of the escrow!

LiterallyIronic
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by LiterallyIronic » Thu Jun 13, 2019 10:29 am

This thread did not go the direction I thought it would. When we got our mortgage, the lender asked if we wanted to handle the taxes/insurance on our own or if we wanted them to do it through escrow. I asked if there was a fee for them to do it and they said there wasn't. So I had them do it. Someone doing my work for me, for free? I'll take that any day of the week.

PatrickA5
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by PatrickA5 » Thu Jun 13, 2019 10:48 am

I would say the average Boglehead would be better off without escrow. But, it depends on the person. My daughter is in the process of buying a home for the first time. I think she will be much better off paying into escrow monthly rather than trying to come up with the money once a year.

I like making my insurance payments using a points generating credit card. Property taxes require a fee for CC use, but if I'm chasing a bonus it's often worth it since it's a fairly large payment.

alfaspider
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by alfaspider » Thu Jun 13, 2019 11:03 am

LiterallyIronic wrote:
Thu Jun 13, 2019 10:29 am
This thread did not go the direction I thought it would. When we got our mortgage, the lender asked if we wanted to handle the taxes/insurance on our own or if we wanted them to do it through escrow. I asked if there was a fee for them to do it and they said there wasn't. So I had them do it. Someone doing my work for me, for free? I'll take that any day of the week.
No for-profit enterprise does anything for free. They are taking the interest/market returns you would otherwise be earning on that money. And you are exposing yourself to risk that the lender botches the payment to the taxing authority. The "work" of paying property taxes amounts to no more than writing a check, or logging on to the taxing authority's website and making an ACH transfer. It takes 5 minutes. Insurance is auto debited to my 1.5% cash back credit card twice a year.

Escrow basically exists for people who live paycheck to paycheck and may not have cash to pay property taxes at the end of the year. There's no reason to have it if that's not you and the lender doesn't require it.

LiterallyIronic
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by LiterallyIronic » Thu Jun 13, 2019 11:27 am

alfaspider wrote:
Thu Jun 13, 2019 11:03 am
LiterallyIronic wrote:
Thu Jun 13, 2019 10:29 am
This thread did not go the direction I thought it would. When we got our mortgage, the lender asked if we wanted to handle the taxes/insurance on our own or if we wanted them to do it through escrow. I asked if there was a fee for them to do it and they said there wasn't. So I had them do it. Someone doing my work for me, for free? I'll take that any day of the week.
No for-profit enterprise does anything for free. They are taking the interest/market returns you would otherwise be earning on that money. And you are exposing yourself to risk that the lender botches the payment to the taxing authority. The "work" of paying property taxes amounts to no more than writing a check, or logging on to the taxing authority's website and making an ACH transfer. It takes 5 minutes. Insurance is auto debited to my 1.5% cash back credit card twice a year.

Escrow basically exists for people who live paycheck to paycheck and may not have cash to pay property taxes at the end of the year. There's no reason to have it if that's not you and the lender doesn't require it.
My escrow (taxes + insurance) is $125/month. That's $1500/year. The interest I'd gain on $1,500 is literally $0.15 per year. Even if the "work" is as minimal as you say, I'll still pass that much work off for fifteen cents per year. And I'd think there's a greater chance of me botching the payment to the taxing authority than them - so I read it as exposing myself to less risk.

pennywise
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by pennywise » Thu Jun 13, 2019 11:42 am

We've only had 2 mortgages and in both cases the escrow account was not optional; the banks (different) required it as one of the loan conditions.

Is it normal and customary that banks allow the borrower to decide if they wish to have property taxes and insurance escrowed? Truthfully I've been very surprised at the overwhelming response indicating that people CAN refuse. I assumed lending institutions would not risk the possibility of loss or damage to the property based on the borrower not paying those expenses.

Enlightenment requested, maybe this is something unique to South Florida?

PS I also loathe escrow accounts for all the reasons enumerated. We eliminated ours by paying off the mortgage-presto, no more escrow :D

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8foot7
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by 8foot7 » Thu Jun 13, 2019 12:41 pm

Escrow transfers the action of paying the bills to the bank without transferring the accountability of paying the bills.

As soon as something gets screwed up (like a sale of your note) and you find yourself paying $6,000 in real estate taxes to your local authority while $6,000 of your own money you dutifully advanced month by month over the past year also sits in escrow because someone forgot to pay it, you'll discover that perhaps escrow is not the convenience you thought it would be. Then when you discover the escrow department pays your $6,000 bill to the taxing authority 30 days after you paid your additional $6,000 directly to the authority because the escrow department originally didn't pay the taxes on time, even after you faxed a payment receipt directly to the escrow department the day you paid the taxes to the county, and you have to wait for a refund of the now overpayment to be approved by your local government, you'll discover that you can probably do a lot better job of paying your taxes with your own money than a large faceless corporation with no skin in the game can.

And then when you receive a document in the mail after the giant overpayment complaining you haven't deposited enough in escrow (because the escrow department is projecting having to pay $6,000 twice within 12 months) and must immediately make up a shortfall, you'll set yourself on fire.

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8foot7
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Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by 8foot7 » Thu Jun 13, 2019 12:46 pm

pennywise wrote:
Thu Jun 13, 2019 11:42 am
We've only had 2 mortgages and in both cases the escrow account was not optional; the banks (different) required it as one of the loan conditions.

Is it normal and customary that banks allow the borrower to decide if they wish to have property taxes and insurance escrowed? Truthfully I've been very surprised at the overwhelming response indicating that people CAN refuse. I assumed lending institutions would not risk the possibility of loss or damage to the property based on the borrower not paying those expenses.

Enlightenment requested, maybe this is something unique to South Florida?

PS I also loathe escrow accounts for all the reasons enumerated. We eliminated ours by paying off the mortgage-presto, no more escrow :D
We've been given the option upfront but generally the option has been accompanied by a rate differential, wherein the mortgage rate is lower if you let them escrow. Many servicers will let you drop escrow after you've paid on time for a while. A while depends on what servicer.

alfaspider
Posts: 1927
Joined: Wed Sep 09, 2015 4:44 pm

Re: Is it Wise to Remove Escrow if Bank Allows it?

Post by alfaspider » Thu Jun 13, 2019 1:24 pm

LiterallyIronic wrote:
Thu Jun 13, 2019 11:27 am
alfaspider wrote:
Thu Jun 13, 2019 11:03 am
LiterallyIronic wrote:
Thu Jun 13, 2019 10:29 am
This thread did not go the direction I thought it would. When we got our mortgage, the lender asked if we wanted to handle the taxes/insurance on our own or if we wanted them to do it through escrow. I asked if there was a fee for them to do it and they said there wasn't. So I had them do it. Someone doing my work for me, for free? I'll take that any day of the week.
No for-profit enterprise does anything for free. They are taking the interest/market returns you would otherwise be earning on that money. And you are exposing yourself to risk that the lender botches the payment to the taxing authority. The "work" of paying property taxes amounts to no more than writing a check, or logging on to the taxing authority's website and making an ACH transfer. It takes 5 minutes. Insurance is auto debited to my 1.5% cash back credit card twice a year.

Escrow basically exists for people who live paycheck to paycheck and may not have cash to pay property taxes at the end of the year. There's no reason to have it if that's not you and the lender doesn't require it.
My escrow (taxes + insurance) is $125/month. That's $1500/year. The interest I'd gain on $1,500 is literally $0.15 per year. Even if the "work" is as minimal as you say, I'll still pass that much work off for fifteen cents per year. And I'd think there's a greater chance of me botching the payment to the taxing authority than them - so I read it as exposing myself to less risk.
One minor screw up by the bank could take a lot longer than processing decades of annual payments. Plus, I don't see how you could screw up a tax payment. They send you a bill, you pay it- just like any other bill. But the bank also has to account for the monthly inputs to the escrow, maintaining the balance, adjustments to your annual taxes, and making sure your account is associated with the correct billing dates. There's just a lot more to go wrong. You also evidently live in a place very low taxes and insurance.

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