The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: jeastith on July 23, 2014, 03:24:30 PM
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I heard from a friend that you get charged extra for having escrow through your mortgage that pays for your property taxes and insurance. Is this true? I did have a loan once where I paid these bills on my own once a year and it was no big deal, but the mortgage company with this new home seems to be pushing the escrow. Are they making money from it?
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My fee schedule does not include anything like that.
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No, but they can (and likely do) earn money from the funds while they sit idle in escrow. I just cancelled my escrow and pay much less monthly so I can earn the interest myself. Something worth considering, but you have to be willing and able to pay the big bills when they come due. Likely not a problem for anyone on this forum.
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In addition to what Cheddar Stacker said... "Extra" could be interpreted many ways.
Often I've had them do calculations and estimates and come up with a number that is greater than "insurance + taxes". But... they don't keep that money... it still sits in the account with your name on it. It's there as a best guess to cover taxes/insurance that is likely to go up. So, yes, they often charge "extra". But it's not a fee. It's just a guess of what the next bill will be.
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Often the interest rate will be a tiny bit lower if you agree to escrow. Escrow protects the lender from you not paying the taxes and insurance. They don't have to track the payments or nag you if you fail to pay on time. Escrow accounts are heavily regulated. Every year the lender has to provide you with an escrow analysis. If they over with held, you get the money back or credited. If they under with held, you pay the difference back over the next year.
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We own 5 houses and I did the coordination for my parents 4 rentals. None of these houses were given the option to opt out of escrow. I personally have never heard of paying "extra".
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Before the recession started, I carried my own escrow for a slightly higher interest rate. I'm not sure if that option is out there anymore considering all of the foreclosures and short sales from 2008 to the present. I was not given an option to hold my own escrow on my latest purchase and refinance using a conventional loan with a 20% down payment.
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Before the recession started, I carried my own escrow for a slightly higher interest rate. I'm not sure if that option is out there anymore considering all of the foreclosures and short sales from 2008 to the present. I was not given an option to hold my own escrow on my latest purchase and refinance using a conventional loan with a 20% down payment.
In CA, it seems, waiving escrow doesn't affect anything. At least not for my lender.
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Often the interest rate will be a tiny bit lower if you agree to escrow. Escrow protects the lender from you not paying the taxes and insurance. They don't have to track the payments or nag you if you fail to pay on time. Escrow accounts are heavily regulated. Every year the lender has to provide you with an escrow analysis. If they over with held, you get the money back or credited. If they under with held, you pay the difference back over the next year.
Bank of America is holding us hostage to an escrow account on our rental property's mortgage in exchange for reducing the interest rate by 0.25%.
It costs them far more to generate the monthly statements and the annual escrow analysis than they're earning from our money on deposit. Serves them right for being so pigheaded about the whole idea. I still ask them about canceling the escrow every year or so (the loan is less than 20% of the home's value) but the answer is always "Sorry, you're getting a discount on the interest rate and that's our policy."
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Often the interest rate will be a tiny bit lower if you agree to escrow. Escrow protects the lender from you not paying the taxes and insurance. They don't have to track the payments or nag you if you fail to pay on time. Escrow accounts are heavily regulated. Every year the lender has to provide you with an escrow analysis. If they over with held, you get the money back or credited. If they under with held, you pay the difference back over the next year.
Bank of America is holding us hostage to an escrow account on our rental property's mortgage in exchange for reducing the interest rate by 0.25%.
It costs them far more to generate the monthly statements and the annual escrow analysis than they're earning from our money on deposit. Serves them right for being so pigheaded about the whole idea. I still ask them about canceling the escrow every year or so (the loan is less than 20% of the home's value) but the answer is always "Sorry, you're getting a discount on the interest rate and that's our policy."
I'd totally take that deal for .25%
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Often the interest rate will be a tiny bit lower if you agree to escrow. Escrow protects the lender from you not paying the taxes and insurance. They don't have to track the payments or nag you if you fail to pay on time. Escrow accounts are heavily regulated. Every year the lender has to provide you with an escrow analysis. If they over with held, you get the money back or credited. If they under with held, you pay the difference back over the next year.
Bank of America is holding us hostage to an escrow account on our rental property's mortgage in exchange for reducing the interest rate by 0.25%.
It costs them far more to generate the monthly statements and the annual escrow analysis than they're earning from our money on deposit. Serves them right for being so pigheaded about the whole idea. I still ask them about canceling the escrow every year or so (the loan is less than 20% of the home's value) but the answer is always "Sorry, you're getting a discount on the interest rate and that's our policy."
I'd totally take that deal for .25%
Oh, we're not questioning what I am, and apparently I'm not even able to negotiate my fees.
I'm merely going to be receiving another 300+ monthly reminders of this bureaucratic stupidity.