Removing escrow from mortgage

[Quagmire 2,148]

Thinking about removing my escrow account from my mortgage , I have met all the requirements to do so.

 

Any downside to doing this ? I have the discipline to sock away the required money and would rather be making interest on the money rather than the mortgage company.

[phdhorn 6,225]

None.  I did it as soon as I was able.  I mean it's not all that different except you have control over more of your money, which is always good.

[T’Boo Ted Marshall 2,779]

I’ll tell if you do.

[Steel Shank 9,534]

State law (Texas) allows the mortgage company to keep an extra two months worth of payments in the escrow account as "insurance", meaning they keep extra money of yours. I got rid of mine as soon as we meet the qualifications to do so.

[texhorn 356]

Sucks balls writing that big check at the end of the year but otherwise worth it to earn that interest. Do it.

[Nueces River Rat 5,762]

22 minutes ago, Steel Shank said:

State law (Texas) allows the mortgage company to keep an extra two months worth of payments in the escrow account as "insurance", meaning they keep extra money of yours. I got rid of mine as soon as we meet the qualifications to do so.

Yep.  This sucks nuts BIG TIME especially if you happen to refinance and you've had absolutely no history of late payments, etc.    And if your taxes and/or homeowners insurance happen to go up enough to hit a certain trigger, they will bump your payment up even if you have enough reserves in the escrow to cover the bills with your annual review.   

Get rid of the fricken escrow ASAP!   

[MNLonghornFUKM 8,964]

No escrow here.

[Quagmire 2,148]

State law (Texas) allows the mortgage company to keep an extra two months worth of payments in the escrow account as "insurance", meaning they keep extra money of yours. I got rid of mine as soon as we meet the qualifications to do so.

Yep this is part of the reason I want to ditch escrow . Not to mention they get to keep the interest

[luke duke 6,448]

How much interest do you expect to earn on the money?

[Gil Bang 26,182]

Tens of quarters

[El Diablo 4,232]

9 minutes ago, Gil Bang said:

Tens of quarters

We both know there are whores in Tijuana who will do nasty things for those tens of quarters. Hell, might not even need to cross the border, just head to National City.

[Spur08 384]

2 hours ago, luke duke said:

How much interest do you expect to earn on the money?

This is exactly what I'm wondering

[tokamak 6,686]

We dropped it after the first year. The mortgage company tried really hard to talk me out of it which indicates that they make decent money off it somehow. As far as I could tell, the only real risk is if you forget to pay on your own somehow. I don't remember what the actual consequences were, but I don't think they look too fondly on people dropping escrow and then missing a tax or insurance payment.

[Gene Parmesan 4,062]

Paying your taxes/insurance premiums via credit card can also net you some points, assuming you are disciplined enough to be able to pay off your credit card come collection time.  Other than that the interest angle is really going to net anything for either party, it's more of just the mental aspect of you controlling your money.  If you are doing it right you are basically setting up your own escrow for taxes/insurance. 

I think a mortgage company being against it is because most people aren't financially disciplined, and it would be a really bad idea for them.

[T’Boo Ted Marshall 2,779]

Would love to pay by CC but the fees outweigh the points you earn.

 

[deft 7,048]

^este

[Surly Bevo 25,662]

6 hours ago, tokamak said:

We dropped it after the first year. The mortgage company tried really hard to talk me out of it which indicates that they make decent money off it somehow. As far as I could tell, the only real risk is if you forget to pay on your own somehow. I don't remember what the actual consequences were, but I don't think they look too fondly on people dropping escrow and then missing a tax or insurance payment.

If you miss it the mortgage company is going to send you a bunch of notices until you keep missing it and then they are going to pay it and force the escrow back on you....

[Quagmire 2,148]

How much interest do you expect to earn on the money?

150-200 bucks a year . Not a ton but would rather keep my own money then give it away to someone else

[Catpfish 618]

16 hours ago, Gene Parmesan said:

Paying your taxes/insurance premiums via credit card can also net you some points, assuming you are disciplined enough to be able to pay off your credit card come collection time.  Other than that the interest angle is really going to net anything for either party, it's more of just the mental aspect of you controlling your money.  If you are doing it right you are basically setting up your own escrow for taxes/insurance. 

I think a mortgage company being against it is because most people aren't financially disciplined, and it would be a really bad idea for them.

Another reason that the mortgage companies are for it is that it is easier for them to be sure the payments they are made if they are making the payments themselves.  Otherwise, they have to have systems in place to make sure that the taxes are paid (they will lose first lien status) and insurance is in place to prevent loss

[luke duke 6,448]

150-200 bucks a year . Not a ton but would rather keep my own money then give it away to someone else

You either have high taxes or you are optimistic about interest rates.

[Quagmire 2,148]

8000 is high for taxes?

8000 @ 2.1% is 168 a year

[chitwood 155]

6 minutes ago, Quagmire said:

8000 is high for taxes?

8000 @ 2.1% is 168 a year

But the escrow isn't taking out all 8000 at once.  So you don't have 8000 invested for all 12 months.

Not saying you shouldn't get rid of the escrow, just the investment return won't be that high.

Edited April 23, 2019 by chitwood

[Dahobbs 18,200]

5 minutes ago, Quagmire said:

8000 is high for taxes?

8000 @ 2.1% is 168 a year

Does your escrow keep 8000 in all year? Mine has about 1 month extra payment right now. It isn't until the end that it has built up for the full tax payment. I think it was like 50 bucks at my savings account rate (2%) that I lost in interest per year last i checked. 

[Quagmire 2,148]

But the escrow isn't taking out all 8000 at once.  So you don't have 8000 invested for all 12 months.

Not saying you shouldn't get rid of the escrow, just the investment return won't be that high.

 

They don’t but I already have the money saved for this year in my own savings. And will transfer monthly payments to fund next year so already ahead of the game. Thought everyone here was top 1%

[luke duke 6,448]

8000 is high for taxes?

8000 @ 2.1% is 168 a year

Divide that by $8000 by 2 to get your average daily balance. So you get $84/yr assuming that you use a high yield online account that continues to pay 2.1% and don’t get lazy and just use Chase/BofA/whoever you normally use. In which case you would get about $4/yr in interest.

[Okie State 3,888]

Did it the day we were eligible. No ragrets.

[Drew 2,822]

How does one get/know when eligible, to get rid of Escrow?

[Quagmire 2,148]

How does one get/know when eligible, to get rid of Escrow?

Contact your loan holder

Essentially you have to have 80% LTV, no 30-60 late payments in last 24 months, loan must be 2 years old minimum, etc

If you have a FHA loan you are out of luck, it’s a requirement

[Rimbo 26,863]

I'm closing on my second home purchase this week, and both times, no escrow was added to begin with. We pay everything directly to the bank (loan), county (taxes) and insurance co (duh) with no from day one. Is that not an option in Texas?

[Drew 2,822]

1 hour ago, Quagmire said:

Contact your loan holder

Essentially you have to have 80% LTV, no 30-60 late payments in last 24 months, loan must be 2 years old minimum, etc

If you have a FHA loan you are out of luck, it’s a requirement

Could you clarify this part for me.  Is that the same as you would need to get the mortgage insurance taken off too?  I'd like to do both honestly.  My escrow amount went up recently and our loan payment went up quite a bit if we didn't pay the "estimated shortage", which we did.  Ugh.

[Quagmire 2,148]

Could you clarify this part for me.  Is that the same as you would need to get the mortgage insurance taken off too?  I'd like to do both honestly.  My escrow amount went up recently and our loan payment went up quite a bit if we didn't pay the "estimated shortage", which we did.  Ugh.

Correct , once you get more than 80% LTV they remove PMI, mine did it auto magically

[Lobwedgephil 1,146]

3 hours ago, Rimbo said:

I'm closing on my second home purchase this week, and both times, no escrow was added to begin with. We pay everything directly to the bank (loan), county (taxes) and insurance co (duh) with no from day one. Is that not an option in Texas?

That is certainly an option. 

[deft 7,048]

Contact your loan holder

Essentially you have to have 80% LTV, no 30-60 late payments in last 24 months, loan must be 2 years old minimum, etc

If you have a FHA loan you are out of luck, it’s a requirement

Are y’all talking about escrow for taxes and insurance, or are you talking about PMI? Because this sounds like you’re talking about PMI.

[Okie State 3,888]

About a year after we bought our house, I contacted my bank and asked them how much left to hit 20% equity. Made the payment and asked them to remove the PMI and refund my escrow balance. I've managed it myself ever since because I like to be in control of my own money.

 

It seems like if you waited a certain amount of time you maybe had to get an updated appraisal. Or maybe I just made that part up.

[UTPhil2006 3,914]

Yeah you guys are confusing Mortgage Insurance with Escrow payments.  

[Rimbo 26,863]

15 hours ago, Lobwedgephil said:

That is certainly an option. 

OK, whew. Some of this discussion about "Texas state law requires 2 months'" etc is making me scratch my head in confusion. Granted, I'm not buying in Texas, since I'm currently surviving a Californian Exile, but ...

[Surly Bevo 25,662]

11 minutes ago, Rimbo said:

OK, whew. Some of this discussion about "Texas state law requires 2 months'" etc is making me scratch my head in confusion. Granted, I'm not buying in Texas, since I'm currently surviving a Californian Exile, but ...

Simple...let's say to keep it easy your tax and insurance came out to 12K a year in 2018. So you would in theory pay 1K a month for your escrow payment to cover those payments in 2019.  BUT the 2 months is a "cushion" because nobody really knows when they are calculating your escrow payment what your taxes and insurance are going to be next year. The law allows the servicer to calculate your escrow payment on the premise that they need those extra two months to cover those increases when the bill comes due next.  Some states allow one month, some states don't allow any cushion (and the servicer has to cough up the money if the bill comes in higher, though they will then collect it back from you)

So if you do happen to live in a state that doesn't allow your servicer to keep a cushion and you generally have appreciating tax/insurance payments it could be worth it in those very specific circumstances to keep escrow and let your servicer come up with the extra money and then pay it back to them the next year interest free....again pretty limited scenarios where that makes sense.

As to Phil's comments on MI.... yes those are generally the same requirements.  Most servicers will apply the same general set of guidelines as a requirement that you meet before they will drop the escrow account the loan was originated with.

Edited April 25, 2019 by Surly Bevo

[Rimbo 26,863]

6 minutes ago, Surly Bevo said:

Simple...let's say to keep it easy your tax and insurance came out to 12K a year in 2018. So you would pay 1K a month for your escrow payment to cover those payments in 2019.  BUT the 2 months is a "cushion" because nobody really knows what your taxes and insurance are going to be next year so the law allows the servicer to calculate your escrow payment on the premise that they need those extra two months to cover those increases when the bill comes due next.

As to Phil's comments on MI.... yes those are generally the same requirements.  Most servicers will apply the same general set of guidelines as a requirement that you meet before they will drop the escrow account the loan was originated with.

Okay, I get how it works when you do it. What I was confused by was that it sounded like you couldn't opt out of Escrow beyond the transfer of ownership. I've certainly never made taxes or insurance payments to anyone other than the County and insurance company, respectively, and neither of my home purchases have required that I pay them into escrow or rolled up into the loan or anything like that. Escrow ends when you get the keys to the house, in other words.

Edited April 25, 2019 by Rimbo

[Surly Bevo 25,662]

2 minutes ago, Rimbo said:

Oh, I know how it works when you do it. What I was confused by was that it sounded like you couldn't opt out of this. I've certainly never made taxes or insurance payments to anyone other than the County and insurance company, respectively, and neither of my home purchases have required that I pay them into escrow or rolled up into the loan or anything like that.

Nah that's just what the law allows the servicer to do when you have an escrow account...if you originate the loan without escrow none of that stuff applies.  But if you do originate the loan with escrow and are in Texas then yea you are stuck playing by those rules until you get rid of it.

Edited April 25, 2019 by Surly Bevo

[Rimbo 26,863]

5 minutes ago, Surly Bevo said:

Nah that's just what the law allows the servicer to do when you have an escrow account...if you originate the loan without escrow none of that stuff applies.  But if you do originate the loan with escrow and are in Texas then yea you are stuck playing by those rules until you get rid of it.

All clear. Thanks!

Edited April 25, 2019 by Rimbo

[MNLonghornFUKM 8,964]

Yeah you guys are confusing Mortgage Insurance with Escrow payments.  

My lender gave the option that since I was putting 20% down, if I wanted to give them I think an extra 1000 at closing to start up an escrow which I declined.

Conventional loan here.

[NeverMarryAStripper 22,247]

Don't most mortgage companies jack up the rate by a quarter to half a point if you opt out of escrow?

[Okie State 3,888]

That sounds like something a shitty bank like Wells Fargo would do.

[UTPhil2006 3,914]

Just ran it through our pricing engine.  No change

LOAN DETAIL

Total Loan Amount:	$320,000.00
Interest Rate:	4.375
Escrow Waiver Fee:	0.000
Total Interest Rate:	4.375

[Horns99 172]

Don't most mortgage companies jack up the rate by a quarter to half a point if you opt out of escrow?

This, I think our Lender did that to us.

[T’Boo Ted Marshall 2,779]

Never heard of that and I’ve taken it off 2 properties as soon as we were under
80% LTV.

[deft 7,048]

Again, since when do you have to be under 80% LTV to avoid doing escrow??

[Okie State 3,888]

Based on previous posts, it seems to be up to the lender. 80% is a threshold that some use, but apparently not all. Mine did.

[NotActuallyALonghorn 4,999]

So y'all take the extra time to pay the insurance and taxes yourself just to save maybe 100 bucks a year? Y'all too cheap to buy turbotax as well? My time has value, and I figure that's a pretty low price to not have to worry about all that.

[Okie State 3,888]

The fuck are you talking about time? Takes five minutes to make the payment and in the meantime I get to have control over a decent chunk of cash. I don't want to trust anyone else with my money if I don't have to. Has nothing to do with saving $100.