Author Topic: Is self-escrow for taxes and insurance worth it?  (Read 768 times)

solon

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Is self-escrow for taxes and insurance worth it?
« on: August 10, 2018, 04:23:50 PM »
My mortgage company will let me self-escrow my taxes and insurance. The mortgage payment will then include principle + interest only, and I will pay the property taxes and homeowner's insurance myself. Is this a good idea?

PROS:
 - hold on to my money longer, earn more interest
 - the amount I self-escrow would be smaller than the amount the company was charging for escrow, because I don't need the safety factor
 
CONS:
 - two more bills to have to remember to pay
 - forgetting to pay could have big consequences
 - interest earned in a savings account is too small to matter

Goldy

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #1 on: August 10, 2018, 04:29:17 PM »
I would if I could

Systems101

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #2 on: August 10, 2018, 04:30:10 PM »
PROS:
- You have 100% control over whether it is paid on time; that doesn't always happen with a mortgage company
- You 100% control what year a payment is made in for tax purposes on property tax; some monthly payments of property insurance on mortgages can make years uneven
- You payment won't change, so you can pay by pushing from a bank autopay rather than letting the mortgage company pull.  Easier to turn off if things go wrong (just stop the billpay system)

I've never had a mortgage company do escrow for me.  Too many horror stories (the first two pros I list are based off real experiences by family members)

robartsd

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #3 on: August 10, 2018, 04:31:30 PM »
In most cases, it won't save you much, but it would have saved me hundreds in the last year. If I were responsible for my property tax payments, the second installment of 17-18 due in April would have been paid in December so I could deduct in from my 2017 taxes (only year I currently expect to itemize). Since the funds were in the escrow account, they sat there until March.

ducky19

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #4 on: August 10, 2018, 05:47:39 PM »
Definitely worth it! Take that opportunity to churn some travel/rewards cards - open a new card when it's time to pay taxes/insurance and reap the rewards!

lhamo

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #5 on: August 10, 2018, 06:14:17 PM »
Definitely worth it! Take that opportunity to churn some travel/rewards cards - open a new card when it's time to pay taxes/insurance and reap the rewards!

Most local gvts will assess a significant service fee (often 3~5%) to payments made via cc.

onlykelsey

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #6 on: August 10, 2018, 06:18:44 PM »
Definitely worth it! Take that opportunity to churn some travel/rewards cards - open a new card when it's time to pay taxes/insurance and reap the rewards!

Most local gvts will assess a significant service fee (often 3~5%) to payments made via cc.
+1

I pay my own but the numbers are (maybe counter intuitively) tiny in Manhattan, so it doesn't really move the needle much.

solon

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #7 on: August 10, 2018, 07:06:12 PM »
Definitely worth it! Take that opportunity to churn some travel/rewards cards - open a new card when it's time to pay taxes/insurance and reap the rewards!

Most local gvts will assess a significant service fee (often 3~5%) to payments made via cc.

Yeah, this is a good point. If I can find a way to pay the taxes and insurance without a service fee, I could churn quite a bit.

lhamo

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #8 on: August 10, 2018, 09:18:53 PM »
Definitely worth it! Take that opportunity to churn some travel/rewards cards - open a new card when it's time to pay taxes/insurance and reap the rewards!

Most local gvts will assess a significant service fee (often 3~5%) to payments made via cc.

Yeah, this is a good point. If I can find a way to pay the taxes and insurance without a service fee, I could churn quite a bit.

Insurance is pretty easy -- I think most insurance companies readily take cc payments.  It's the taxes that are tricky, and for most people that amount is the biggest number.

ender

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #9 on: August 11, 2018, 06:22:17 AM »
I paid a years worth of property taxes when the insane credit card signup bonus for the Sapphire Reserve came out a few years ago. That was well worth it (the net proceeds for the card more than outweighed my having to pay ~2% CC processing fee). I don't manufacture spend at all so in this case, I basically got 35% off my yearly property taxes when factoring in the benefit from the card I would not have been able to spend the $4k or whatever it was otherwise.

I've also batch paid my property taxes early (so 3 halves of a year in one calendar year) to take better advantage of deductions in a single year.


CindyBS

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #10 on: August 11, 2018, 12:36:39 PM »
I stopped our escrow in the early 2000's when savings accounts had much better interest rates.

I wouldn't go back to an escrow and refused it for our last refi several years ago.  My main reason is I don't like giving no interest loans to anyone, most especially a bank.  Even if I don't make a lot of money by not escrowing, I just like having the flexibility with our money.

I don't know how it works where you live, but here we get a bill in very obvious envelope every 6 months.  The due dates for the taxes are the same every year.  Insurance is once per year, always the same month.   The banks like to scare you like it is some big hassle to pay them yourself or how it is so easy to forget, but unless you have a problem consistently paying bills on time, that is all just BS and I would not consider them a "con".  I spend maybe 10-15 minutes per year dealing with this.

Timmm

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #11 on: August 12, 2018, 07:28:22 AM »
It's definitely worth it to me - I keep the cash, no free money for my lender to hold. Like others have said, insurance is easy to pay via CC and two of our properties allow CC payment with no fee.

I did just screw up for the first time this year. Forgot about following up on one payment until the day after it was due. The county assessed a 1% fee. That sucks, but it was still (barely) covered by the 3% CC cashback, less this county's 2.5% credit card fee. I am not worried that will happen again.

Plus, I've had a tax payment fiasco when the lender was doing it via escrow. The county said they didn't get paid and the lender said they did. There was very little I could do, and the lender wouldn't or couldn't provide some kind of evidence or details of payment - as I repeatedly told them they'd insist I provide if I claimed to have made a payment they didn't see. The lender doesn't actually send a simple payment for each property, they send one big payment for all their properties in the county with some kind of ledger noting how much is for each property. It eventually got sorted out with no hard costs, but it was a huge time sink for me.

So that's two goofs over multiple properties and over 20 years, and the lender's was far worse to deal with.

I'm a cheapskate, so I never paid fees to avoid escrow when getting a mortgage, but a few allowed it with no extra cost, and almost all allowed removing it soon enough. So I've had much more time without escrow than with.

Davids

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Re: Is self-escrow for taxes and insurance worth it?
« Reply #12 on: August 12, 2018, 08:43:34 AM »
I do it, if you can do it. I know some mortgage companies won't allow it or charge a slightly hire rate if you want to self escrow.