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Would you do it?

October 20th, 2009 at 05:01 pm

I recently inquired with our mortgage lender about handling our own escrow. Their answer: Yes!

The primary loan is for less than 80% of the homes value, so I'm not sure why I didn't think of this before!

So...should I do it?

I do our own escrow for things like auto insurance, registrations and life insurance, so I know how to save ahead. It works really well.

I would not need to escrow the same amount as the mortgage company because I have our own emergency fund to dip into should something increase drastically. Right now they need a cushion of 16.6% of my total escrow to cover increases. I would also be able to earn interest on this money!!

Any disadvantages that anyone can think of? Let me hear what you think.

11 Responses to “Would you do it?”

  1. LuxLiving Says:

    I did this AS SOON AS it was POSSIBLE!!! Same reasoning you gave.

    Just kept an eye on any proposed house tax increases and upped my dollars put back for those.

    I say Go For It!!

  2. Mooshocker Says:

    Great idea. Your local bank, credit union or even cash management fund may pay YOU more interest than the bank allows you to right off. Great job uncovering this little tool. Just remember to be diligent in making those monthly deposits to yourself. God bless.

  3. ceejay74 Says:

    Omigod, can you do that? Wait, is it only when you have a certain amount of equity?

    I have annual, quarterly and semiannual bills that I put aside a fixed amount for each month, so I could certainly handle my own escrow, but my mortgage is currently underwater.

  4. creditcardfree Says:

    Ceejay...yes, it is usually when you have at least 20% equity. When we bought this house we took out a mortgage for 80% of the sale price and the home equity loan for something less than 10%. I'm not sure why I didn't inquire about it then!

    It doesn't hurt to ask your mortgage lender. I did and wasn't really expecting the answer I got.

  5. mjrube94 Says:

    I did this several years back and found they were witholding about $1500 more than they needed to.

    Check with your town- they may have auto withdrawal option from your checking acct so you won't forget to pay it. I opened up a new account (with a bank giving away a $100 bonus to boot) just to keep it separate from other funds. Good luck!

  6. monkeymama Says:

    It depends on your mortgage - they often charge you more initially, to do your own escrow. Not sure you can get out of it if you do escrow for a lower interest rate. (Even with enough equity).

    Anyway, YES you should do it. We have always paid our own insurance and property taxes. I have seem to many clients' mortgage companies forget to pay a bill. OF course - it's not their problem when that happens - it's yours! As an aside, our in-laws forgot that their insurance was escrowed when they paid off their home. Someone tripped in front of their house, sued them, and they realized their insurance had been dropped - company never contacted them for payment. Just one more disaster avoided by doing it yourself! (I mean, you figure that has to happen a lot!)

    Escrow is only worthwhile if you have absolutely no discipline.

    I personally took a higher interest rate so I didn't have to leave my bills in the hands of the mortgage company. Ugh.

  7. Petunia Says:

    We put more than 20% down on our house and we've never had escrow. We've never had a problem paying our mortgage, taxes or insurance. Go for it!

  8. whitestripe Says:

    what is escrow?

  9. creditcardfree Says:

    Text is Here's and Link is
    Here's the wikipedia definition.

    It's basically an account that is established by mortage companies to collect money for homeowners insurance and property taxes. The mortgage company then pays for those items out of your escrow account when they are due. It's required on many loans here in the United States.

  10. campfrugal Says:

    I have always paid my own taxes and insurance on my home. I like to be the one in control. I say go for it.

  11. whitestripe Says:

    i see. interesting how different mortgages are in the states compared to here in AU, thanks for the info!

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