anyone not escrow their Taxes and Insurance?

toile · 10-01-2008, 04:28 PM

My hubby and I have never paid it ourselves, except through escrow.
This year the mortgage company is charging us $200 extra per month and we are not happy!

Anyone else plan and just pay theirs themselves?
Do you utilize a savings account for this?

**Ivonna** · 10-01-2008, 06:21 PM

We have always paid it ourselves. My husband had the theory that if he was ever to get laid off from work (worked for Maytag at the time) that we could afford to pay our $534 mortgage and if we were desperate come tax time we could borrow the money from parents or scrape the money together some other way. And the lay offs did happen twice before losing his job for good. Luckily, we had an idea when he would be laid off and were always able to save up ahead of time to cover those expenses.

I figure out how much money per month needs to be put into savings for taxes and house insurance. I have sinking funds for each and have NEVER touched that money for anything but taxes and insurance. I have found that I need to plan for the cost to go up a little more each September when our first half is due, so I have started putting aside extra each month.

Ivonna

**FrugalMomof3** · 10-01-2008, 06:26 PM

You know I never thought I doing it any other way but having the mortgage company handle that but I agree with the economy the way it is and with jobs being so scarce right now, paying it ourselves might not be a bad idea, especially since the mortgage companies want you to pay a bit extra for a "cushion".

Might have to talk to DH about this one for future reference.

**MomToTwoBoys** · 10-01-2008, 06:44 PM

We have ours directly withdrawn from my checking account on the 1st of each month. It's a program called TIPP and it works out pretty well, actually. It's alot better than putting money into savings and then putting that lump sum into one payment.

We do the same thing for our house insurance.

**HappyMama** · 10-01-2008, 06:53 PM

I always have paid my taxes myself for many reasons here is just a few won't list them all:

One I make the interest off the money not the bank. Here is one example:

If you had a 30 year fixed rate mortgage of $125k at 6% your principal and interest payment would be $750 a month. If you escrowed it would be $750 + $333= $1,083. Putting that $333 in a savings account that earns 2.5% -3%. If you put that away over one year you would have 120.00 assuming a 3% interest. Not a lot to some people but your interest none the less.

Not only that I have had too many friends be in trouble when their banks goofed it up or I could tell you horror stories that I am sure you didn't want to hear when you asked the question....LOL

By doing so you will earn interest on your money and have better control of what your money is doing. You will not have to worry about your mortgage company sending your bill to the wrong office or getting notices that you do not have enough in your escrow account to make the tax bill ( does happen at times ).

**sdrjeolsen** · 10-01-2008, 07:41 PM

We've always paid them ourselves too. I hate to see the bank make interest off my money for a whole year.

We figure the amount of RE taxes & homeowners ins + 10% (incase they go up) and divide that over the # of pay periods in the year then withdraw that amount every paycheck and it goes into savings. I have a special account for things like that (auto & life ins, home repairs, medical, EF, Christmas, propane fills, etc) and we make no exceptions when it comes to deposits and we dont withdrawal except for the things designated to be spent on. Works well for us. Its an e-account, so it takes 2-3 days to get the money transfered over to our checking....removes the urge to use it for wrong things.

**forHISglory** · 10-01-2008, 09:49 PM

When we had a mortgage, we paid it ourselves. As one poster mentioned, we got the interest off it, not some other company. It was pretty simple for us: just divide the total by 12 and put that aside every month.

Caveat: Be very disciplined. And be sure your math is correct.

**frugalfoster** · 10-01-2008, 10:31 PM

We have 2 houses...one that we pay the tax and insurance on and one that has an escrow account. I really should pay the taxes and insurance on that one too. Between the 2 houses it is about $6,000 a year. That's a lot of interest I could be earning. I probably need to look into that! Thanks for bringing this subject up!

**tervsforme** · 10-02-2008, 08:48 AM

I pay my own taxes and insurance as well. I have money automatically taken out of each check and it goes to a savings account at a bank I only use for this purpose, so I'm not tempted to spend it. I have a little extra transferred so that I have money for miscellaneous things that come up during the year like turning on and off the sprinklers, stuff like that. It works out good for me.

**nuisance26** · 10-02-2008, 09:02 AM

~We've paid our own for 6 years now. The funds for both are in the budget so it builds up in our account and is there when we need to make payments. HappyMama, your math is incorrect. 3% is an APY number. You divide your interest rate by 12. So .03 / 12 = .0025. So every month that $333 X .0025 earns you $.83 in interest. That's just $9.99 over the year.~

Originally Posted by HappyMama

If you had a 30 year fixed rate mortgage of $125k at 6% your principal and interest payment would be $750 a month. If you escrowed it would be $750 + $333= $1,083. Putting that $333 in a savings account that earns 2.5% -3%. If you put that away over one year you would have 120.00 assuming a 3% interest. Not a lot to some people but your interest none the less.

**Greebo** · 10-02-2008, 09:08 AM

Originally Posted by toile

My hubby and I have never paid it ourselves, except through escrow.
This year the mortgage company is charging us $200 extra per month and we are not happy!

Anyone else plan and just pay theirs themselves?
Do you utilize a savings account for this?

The mortgage company, by law I believe, can not take from you more than you are expected to owe for taxes and insurance. You pay them, they pay the taxes and premiums. They aren't "charging" you - they are simply collecting and holding it for you to ensure it is paid.

The escrow is part of your contract with them, so you can't just stop them from taking it.

They do this because they want assurances that the house will stay insured and the taxes will be paid. They are protecting their own interests.

The only way you can stop the escrow is to refinance with a firm that doesn't do it.

As it happens, our credit union doesn't do escrow - so we put the money aside each month into a special savings account we created for the purpose.

**HappyMama** · 10-02-2008, 11:10 AM

Originally Posted by nuisance26

~We've paid our own for 6 years now. The funds for both are in the budget so it builds up in our account and is there when we need to make payments. HappyMama, your math is incorrect. 3% is an APY number. You divide your interest rate by 12. So .03 / 12 = .0025. So every month that $333 X .0025 earns you $.83 in interest. That's just $9.99 over the year.~

Sorry should have clarified my is in my account that compounds monthly so yes it is 120 dollars interest. That was not my example of my savings per year mine is actually 135.00 but just used an example.

Be aware, some lenders will require you to have 20% equity before you can do this.

**WV_mom_of2** · 10-02-2008, 01:55 PM

Our bank doesn't escrow for these so we have always paid them ourselves. My dh gets 5 vacation checks a year and we just get one of those when each is due and pay it with that.

**LexTysMommy** · 10-02-2008, 02:07 PM

I pay my own taxes and insurance. I pay insurance at beginning of year for year. And taxes are split in 3 payments. january, april and july. I save up for these in a savings account.

**jettsmom** · 10-03-2008, 06:35 PM

When we get our tax return, we put the tax $$ in savings. That money is not touched for anything. No emergencies, nothing.

Our insurance, we pay monthly.