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Escrow accounts

Home Mortgages and Home Buying Escrow accounts

  • Lordosis Lordosis 
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    Status: Physician
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    Joined: 02/11/2019

    I am working on gathering information to refinance and lenders are always surprised that I do not escrow my taxes.  Is it really that uncommon?  Do that few people now had 20% equity in their home or do people just like the simplicity of monthly payments?

     

    Fun fact-  I live in New York and they now require banks to give you 2% interest on your escrow account.  The last bank I talked to told me about this.  I commented that is almost as good as my MMF and he said that money markets and banks do not pay interest over 2% and asked me to show an example if I know of any.  I had just told him that mine paid more so maybe he did not believe me.  He also claimed to be the investment guy in his department  :/  I will not be following up with this bank.

    “Never let your sense of morals prevent you from doing what is right.”

    #227404 Reply
    Liked by Anne, ENT Doc
    CordMcNally CordMcNally 
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    Status: Physician
    Posts: 2477
    Joined: 01/03/2017
    Do that few people now had 20% equity in their home or do people just like the simplicity of monthly payments?

    Click to expand…

    I think a majority of people like the simplicity that the payments are taken out in relatively equal 12 month installments and they don’t have to worry about making the actual payment. I also think a majority of people wouldn’t have the money whenever it came due.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #227414 Reply
    Liked by ENT Doc
    Rogue Dad, M.D. Rogue Dad, M.D. 
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    Status: Physician
    Posts: 963
    Joined: 03/07/2016

    I don’t escrow my home owners insurance $ — that way I can pay it all together with other insurance payments and make 2% on my CC. I also store the $ monthly in online savings to gather interest until I need it.

    I still escrow the property taxes — I could probably do that on my own also and probably will eventually, but it’s more of a mental shift Then the insurance $. However I can’t charge that to my CC (without a fee) so don’t get as much benefit from paying on my own.

    http://www.RogueDadMD.com

    An alt-brown look at medicine, money, faith, and family

    #227427 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1209
    Joined: 02/11/2019

    I don’t escrow my home owners insurance $ — that way I can pay it all together with other insurance payments and make 2% on my CC. I also store the $ monthly in online savings to gather interest until I need it.

    I still escrow the property taxes — I could probably do that on my own also and probably will eventually, but it’s more of a mental shift Then the insurance $. However I can’t charge that to my CC (without a fee) so don’t get as much benefit from paying on my own.

    Click to expand…

    True it does force me (actually my wife)  to physically write a check.  It would be nice to get 1-2% back on the CC.    I do use the CC for the insuance as well but that is less then 1/10th the taxes so kind of insignificant.

    “Never let your sense of morals prevent you from doing what is right.”

    #227436 Reply
    Avatar G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1644
    Joined: 01/08/2016

    guess you can add this to the list of reasons to own your house.

    (as opposed to the bank.)

    #227453 Reply
    Avatar Brains428 
    Participant
    Status: Physician
    Posts: 295
    Joined: 11/09/2017

    Noob question… escrow is a type of an account, correct? And not a verb?

    How does one use this for property taxes? Is it essentially a separate account held until taxes are due? In the brief research, it looks like a 3rd party holds the funds until requirements are met. I’m assuming if one buys a house in cash then an escrow would be the way to go?

    #227844 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2477
    Joined: 01/03/2017

    Noob question… escrow is a type of an account, correct? And not a verb?

    How does one use this for property taxes? Is it essentially a separate account held until taxes are due? In the brief research, it looks like a 3rd party holds the funds until requirements are met. I’m assuming if one buys a house in cash then an escrow would be the way to go?

    Click to expand…

    Yes, typically your mortgage company will hold the money in their account and pay the taxes and insurance as they come due from that account. They’ll re-calculate your surplus or shortfall every year and adjust that amount so you may end up having to pay a little more or less depending. Some people get in trouble because they end up being quite a bit short.

     

    If you buy a house in cash then you can probably just make the payments whenever you need to pay for property taxes or insurance. You could always put that money in a separate account but that would just be a few extra unnecessary steps.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #227846 Reply
    Liked by Brains428

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