Author Topic: Real Estate Tax and Home Insurance Escrow Accounts  (Read 1566 times)

AlwaysLearningToSave

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Real Estate Tax and Home Insurance Escrow Accounts
« on: December 01, 2015, 03:35:41 PM »
When I first posted a case study, helpful Mustachians pointed out that our income tax withholding was too large.  I was essentially giving the government an interest-free loan while I continued to accrue interest on student loans and a relatively high rate.  That was very helpful and insightful advice and making a change allowed me to throw a couple hundred dollars per month extra per month at our student loans. 

We bought our house prior to our discovery of mustachianism.  We got a conventional mortgage, but we had less than 20% down so we paid for PMI in a single, up-front premium payment.  We also allowed our lender to set up an escrow for real estate taxes and insurance assuming it was required or that it would at least be easier than managing the large payments.  I am now looking at the escrow portion of my monthly mortgage payment with the same thought process-- why am I giving the bank an interest-free loan every month?

Is it possible to terminate an escrow account once it is established?  Does it depend on the type of loan?  Anyone successfully terminated an escrow account?  Anybody had success with Wells Fargo in particular?  Any links to helpful resources?  Any insights are appreciated! 

protostache

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Re: Real Estate Tax and Home Insurance Escrow Accounts
« Reply #1 on: December 01, 2015, 04:14:15 PM »
Here's a helpful article on Nolo about this. It sounds like it may be possible, but the lender may have to agree to it in writing, and may not waive it at all. You'd have to contact the lender to find out.

DaveR

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Re: Real Estate Tax and Home Insurance Escrow Accounts
« Reply #2 on: December 01, 2015, 04:54:05 PM »
I looked into similar for one of my loans and didn't get very far..."that's not something we do." Check your loan docs, they should have some legalese about the escrow account. I couldn't renegotiate that one clause, though I could have done a re-fi (thus negotiate a new contract).

StacheInAFlash

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Re: Real Estate Tax and Home Insurance Escrow Accounts
« Reply #3 on: December 01, 2015, 06:29:54 PM »
Check your loan docs, they should have some legalese about the escrow account.

Yeah, I would think you should find some info about that in the stack of mortgage documents. In mine, it said I was able to drop my escrow account at the same time I could drop PMI, which was when I reach 78% LTV, which is when I did it without any hassle. Just needed to fill out a form with the bank promising to make those payments and agreeing to have them reinstate the escrow if they found out I wasn't paying my taxes. Then they promptly cashed out my escrow account and put the funds in my checking account. Definitely nicer to not have the escrow account...what an annoying thing that was, bank always changing my payment and dealing with a three ring circus trying to get money refunded from 1 insurance company when I switched to another. Then the bank coming back at the end of the year telling me they needed another $117 or whatever. Nice not to deal with that fiddle-dickin' anymore. I'm a big boy, I can handle paying the property taxes and homeowners on my own.

Bearded Man

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Re: Real Estate Tax and Home Insurance Escrow Accounts
« Reply #4 on: December 01, 2015, 06:53:17 PM »
I was told you usually get charged a premium for this privilege. Not sure it's worth the hassle, that many more things to keep track of when you own three houses and are trying to buy a couple more.