The Money Mustache Community
General Discussion => Share Your Badassity => Topic started by: Bird In Hand on January 29, 2020, 08:00:28 AM
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I know some people really like mortgage escrow accounts because it offloads the burden of managing taxes/insurance. That's now how I feel about it though. For me the burden is minimal: writing a check 2x a year for taxes, and making sure money is in the checking account when the insurance debit goes through once a year.
More importantly though, I prefer actually paying my taxes in a lump sum. Writing a check for thousands of dollars causes me to reflect on personal finances (the amount itself and how that relates to our overall yearly expenses as we approach FI), and civic matters (how the town is spending my money). When the taxes are averaged out per month as part of our mortgage escrow, I tend not to think about it at all. Similarly, paying the insurance at once will prompt me to investigate whether I can get the same coverage for cheaper elsewhere. Greater intentionality == greater badassity, IMO.
We only have ~4 months of payments remaining on the mortgage. Rather than waiting for the mortgage company to eventually refund any escrow $$ some weeks or months after closing (I've heard it can take up to 3 months), we'll be getting the current escrow balance of $2,100+ a couple months before we pay off the mortgage. We can invest that, use it to just kill off the mortgage earlier, put it toward our taxes due in June, etc. The bottom line is we will have a much more productive use for the money than the mortgage company did. They kept a ~$2,000 buffer in a non-interest bearing account. We can definitely do better than that.
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Solid decision! Sounds like you're going to be getting a "bird in hand." :) Or rather, more than 2,100 birds.
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Your escrow account was non-interest-bearing? I'm pretty sure that's illegal in my state. In any case, our escrow account is interest-bearing. We get two tax statements each year from our mortgage company, a 1098 showing the interest we paid them and a 1099-INT showing the interest they paid us.
ETA: Congrats!
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Now you can do a few soft credit card churns with the house insurance. Most companies let you pay with a credit card with no or minimal fee. You can use it to help meet minimum spend for sign-up bonuses. Depending on your state, you may be able to do it with property taxes as well (for a small fee that the bonus more than makes up for).
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Now you can do a few soft credit card churns with the house insurance. Most companies let you pay with a credit card with no or minimal fee. You can use it to help meet minimum spend for sign-up bonuses. Depending on your state, you may be able to do it with property taxes as well (for a small fee that the bonus more than makes up for).
Interesting idea -- I'll have to check with our insurance company to see if we can do that. We pay almost all our bills via CC, and recently I started thinking about CC churning to rack up some travel miles.