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Calculating Escrow

November 2nd, 2009 at 02:33 pm

Remember, we deleted the escrow account with our mortgage? Here's the breakdown of how we will save for our own homeowners insurance and county taxes:

$1361.00 March Taxes
$1361.00 September Taxes
$658.47 Homeowner's Insurance (October)
---------
$3380.47 Annual Total
$281.71 Monthly Savings

I have simply rounded the amount up to $285. I have set up a monthly draft to our money market account where I will save this money until needed. Obviously, if taxes or insurance go up significantly, I will be short. However, since this money will be sitting with our emergency fund there will always be extra money available if needed. I also plan to stay on top of any tax changes or increases in homeowners insurance and adjust the draft when necessary.

When doing this calculation, it is important to run down the balances each month to make sure there is enough money in the account when the first payment will be due. If it is short, then you need to start your account with at least that amount, or divide it over several months prior to the first payment. Run through the full year to make sure you won't have a month where you are short on funds for the payment.

Automated savings is the only way to go!! It is so easy. Record and go.

4 Responses to “Calculating Escrow”

  1. monkeymama Says:

    Way to go!

    I escrow about $1250/month and thinking it should be $1400 for next year. Not just property tax/ins. - no!!! Just everything that needs to be saved up for in a given year.

    IT's automatic so I don't miss it! Always having the money to pay large bills makes life much easier. (& not relying on the mortgage company to pay your bills, is a good thing, as long as you can handle it. I already commented about that!)

  2. creditcardfree Says:

    I actually save another $156 a month for other items: life insurance, auto insurance and auto registrations.

  3. ceejay74 Says:

    Great job!! I hope I can do this someday, whenever I get out from underwater and into some equity (5 years from now, hopefully?). I never called it this, but I escrow $20 per month for annual homeowner's insurance, and $70 per month for quarterly & semiannual student loans. It's an easy way to gradually save up for these occasional bills so I don't feel the bite when they come up.

  4. boomeyers Says:

    Great idea!

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