Comments on Everything Finance: Mortgage Escrow: To Do Or Not To Do

I recommend that you check out http://www.stopsitt...

2008-07-30T00:44:00.000-04:00

I recommend that you check out http://www.stopsittingonyourassets.com --- I go there to have my mortgage questions answered. Hope this helps.

The lender doesn't keep the interest on the escrow...

2007-12-05T15:16:00.000-05:00

The lender doesn't keep the interest on the escrow account. It's credited to your account.

I worked for one of the more reputable mortgage co...

2007-11-21T21:52:00.000-05:00

I worked for one of the more reputable mortgage companies back in 2003-2005. The company is one of the ones that is still around and is doing (relatively) well.

First of all, "So I negotiated with the broker and he said that he is willing to "eat up" that quarter point."

I did not get paid more if I set up an escrow account for a client. Therefore, there was no incentive for me to recommend for or recommend against getting escrow.

"The major advantage of a mortgage escrow is that the lender assumes responsibility for paying your property taxes and homeowners insurance. This is also the major disadvantage. In addition, with an escrow the lender gets to keep the interest on your account."

This is NOT the biggest hassle I've had with escrow. The interest accrued is small and in the scale of less than a hundred dollars and certainly worth the convenience.

The biggest headache I've had to deal with is during refinances or when client's monthly mortgage bill went up (because their escrow bill went up).

This is a typical scenario. Bob has a $2500 mortgage with $150 ($1800 annual payment) in taxes and $100 ($1200 annual payment) in insurance. His total monthly bill is $2750. For the sake of this discussion, Bob has a fixed 30yr mortgage.

In year 1, all is well. Bob makes 12 payments of $2750.

In year 2, his property taxes goes up because the property appreciated. His taxes are now $2000. But the escrow account isn't paid until the end of the year so he keeps paying $2750.

In year 3, the escrow account has paid out the full $2000 making his account short. Also the escrow account just realized the taxes is $2000 so it adjusts accordingly. Bob's monthly payment is now $2900. Bob calls me and gets really miffed at his $150 increase in payments.

I have found that it is far easier to let the client deal with the surprises about the taxes from their tax bills.

So in short, don't use escrow.

I've done it both ways, and it looks like you have...

2007-11-21T13:09:00.000-05:00

I've done it both ways, and it looks like you have a good handle on the pros and cons.

Not a big deal one way or the other, as long as you are able to pay the bill.

Scott, if you want to open a placeholder account f...

2007-11-21T10:37:00.000-05:00

Scott, if you want to open a placeholder account for yourself thats fine. It doesn't have to be an escrow account with a 3rd party. Just open a money market account and start paying your taxes in there. Then when you get the tax bill, pay the whole thing off from that account. Hope this helps.

I like the convenience of having everything rolled...

2007-11-21T10:32:00.000-05:00

I like the convenience of having everything rolled together, but you got me thinking.

What if you set up your own escrow account, still make incremental payments to avoid getting one big bill and you will earn the interest from the account instead of the lender?