Author Topic: First mortgage - is it worth $731.25 to waive escrow  (Read 2523 times)

bokonon

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First mortgage - is it worth $731.25 to waive escrow
« on: May 13, 2016, 05:06:46 AM »
I am in the process of buying my first home with a conventional 30 year loan with 10% down.

After doing some research on here I asked my lender if I could waive escrow.  They replied that I could at a one time fee of 0.25% of the loan due at closing.  The loan is 295,000 and they said the fee would be $731.25 even though that's not exactly 0.25%.

My initial feeling was that I didn't want to pay any extra at closing, however looking at my loan estimate it looks like they want a large amount of cash to fund the escrow amount for the first year at closing - $2,276 which is way more than the fee to waive escrow.

My annual taxes are $2,084 and my insurance is about $700

I hate the whole idea of escrow - my money sitting idle doing nothing and some middle man between me and my taxes / insurance and I'd rather just handle it myself.  Paying the taxes and insurance will not be a problem whatsoever.  Would you waive escrow in my situation?

Thank you!

GrOW

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Re: First mortgage - is it worth $731.25 to waive escrow
« Reply #1 on: May 13, 2016, 06:37:05 AM »
My first thought is to find a new lender. Second thought is to tell the lender it is a BS fee and to do it for free. Third thought is to ask the lender to reduce other fees to offset this BS fee. Sensing a theme here?

If those are not options for you, consider the math.

Very rough math given limited inputs

Avg balance in escrow account could be about $1,800
Using one of the very high interest savings accounts like Netspend 5%, you would earn $90 per year
$731.25 non escrow fee would be recouped in a little over 8 years
If you plan on owning the house more than 8 years, it works out from a math perspective

forummm

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Re: First mortgage - is it worth $731.25 to waive escrow
« Reply #2 on: May 13, 2016, 09:40:36 AM »
It is somewhat common to have a 0.25% increase in your interest rate for the life of the loan if you waive escrow. So a one-time fee is much better than paying that every year for the life of the loan (assuming you stay in the house and loan for more than a year).

Given the average balance of the account, if you were to invest the money in stocks, you'd probably get less than $100 per year in return on it.

I personally don't like having the cash sitting there. But I mostly don't like having anxiety every year about whether they will actually pay the bills on time. Fortunately they've done it just fine the past 5 years so I worry less about it. So I deal with it. It is also slightly convenient to not have to come up with a couple grand at once each year (but I wouldn't have trouble with that though).


Krolik

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Re: First mortgage - is it worth $731.25 to waive escrow
« Reply #3 on: May 13, 2016, 12:12:51 PM »
We did that when we bought our house in December. We paid one time fee and have no escrow now. I personally love the fact that bank is not holding any extra money for insurance, taxes. I can take care of it myself.

Kroaler

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Re: First mortgage - is it worth $731.25 to waive escrow
« Reply #4 on: June 02, 2016, 09:29:33 AM »
I have chase.   I un escrowed after a year and cost me nothing. 

Meowmalade

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Re: First mortgage - is it worth $731.25 to waive escrow
« Reply #5 on: June 02, 2016, 10:05:18 AM »
I have waived it in the past, for a fee, but then ended up refinancing or selling the property.  I've also gotten a HELOC (free!) but have been forced to close it during a refi, to the tune of several hundred dollars.  If you think you might do either, I'd get the escrow now and see if they will waive it for free later.  I don't even want to think about the hundreds, maybe thousands of dollars I've paid upfront and then lost.  We're doing a refi now and I decided to do escrow for the lower rate.  I like having control but they haven't messed up my payments yet!

bokonon

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Re: First mortgage - is it worth $731.25 to waive escrow
« Reply #6 on: June 05, 2016, 05:54:40 AM »
Thanks for the input all.  I decided not to pay to waive escrow at this time.  I don't currently plan on moving or refinancing in the next 8 years but you never know and maybe they will let me waive it for free down the line.

Choices

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Re: First mortgage - is it worth $731.25 to waive escrow
« Reply #7 on: June 05, 2016, 09:26:50 AM »
Rather than worry about escrow, do you think you could manage the payment if you changed the term to 15 years? You'd end up saving a ton of money over time, and the stated interest rate is usually lower too.

ender

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Re: First mortgage - is it worth $731.25 to waive escrow
« Reply #8 on: June 05, 2016, 12:57:00 PM »
I don't really understand why your bank is requiring you to pay to waive escrow. You are probably too far along to avoid the fee but in the future you can always ask during a preapproval process.

We're putting 20% down and after asking were told to let them know if we wanted to waive escrow. As best I can tell, it'll be free for us to do this without any rate increase either.