Mortgage - To Escrow or not to escrow? Pros and Cons

[Anonymous]

we just refinanced, and the new servicer (which is coincidentally the same as the old servicer) won't escrow insurance. I actually wish they would. At least they still escrow the taxes.

[Anonymous]

The only thing that annoys me is that my mortgage company insists on holding back 2 months of escrow reserves. So my monthly escrow payments are higher than my actual costs. What a ripoff. But they are allowed to do it in my state. Of course, I get that money back if I pay off the loan or refi away from them.

[Anonymous]

We escrowed with our first place (Wells Fargo, had no choice) and several times got notices from our tax department that payments hadn't been made. It always got worked out, but not without a few phone calls. And, they escrowed almost a full semi-annual payment above and beyond what was needed - which was nice to get back when we sold, but I'd rather have that money working for us. So when we had the choice to not escrow with our next place, without higher interest, we took it. Once I got everything set up - direct monthly deposits from my checking into a money market account set up just to hold property tax funds - all I do is write a check 2x/year. The interest isn't much now, but better than not getting any. Plus, I like having control over the process.

[Anonymous]

Anonymous wrote:No mortgage company I've ever used has given me the option, so we've always had to use escrow. Would love to get rid of it.

If you live in DC there is a statute that expressly permits you to require your mortgage company to let you pay your own taxes if you have 20% equity and make the request in writing. If you are in MD or VA, sorry, you are out of luck. Statute cite and text is below:

§ 26-1115. Escrow accounts.


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(a) All moneys required by a Search Term Begin mortgage Search Term End lender to be paid by borrowers in escrow to defray future Search Term Begin taxes Search Term End or insurance premiums, or for other lawful purposes, shall be kept in accounts segregated from accounts of the Search Term Begin mortgage Search Term End lender, and shall not be commingled with other funds of the Search Term Begin mortgage Search Term End lender.


(b) No licensed Search Term Begin mortgage Search Term End lender shall require any borrower who, on the date of execution of the loan or financial transaction, has made a down payment equaling 20% or more of the total purchase price of the Search Term Begin property Search Term End or who has an equity interest in the Search Term Begin property Search Term End equal to, or greater than, 20% of the fair Best Section End Best Section Begin market value of the Search Term Begin property Search Term End , to make advance payments of the real estate Search Term Begin taxes Search Term End or casualty insurance premiums to enable the Search Term Begin mortgage Search Term End lender to have funds on hand for disbursement for payment of such Search Term Begin taxes Search Term End or insurance premiums. Licensed Search Term Begin mortgage Search Term End lenders shall provide such borrowers with a separate statement, in writing, which clearly and conspicuously sets forth the right to pay such Search Term Begin taxes Search Term End and insurance premiums directly. Nothing contained in this subsection shall be construed to prohibit a licensed Search Term Begin mortgage Search Term End lender from obtaining, during any period during which the loan is in default and in consideration for the lender not exercising some or all of the remedies to which it is entitled, a written agreement from the borrower to make such advance payments to enable the Search Term Begin mortgage Search Term End lender to have funds on hand for disbursement from payment of such Search Term Begin taxes Search Term End or insurance premiums.
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(c) No licensed Search Term Begin mortgage Search Term End lender shall require any borrower to pay any money in escrow to defray future Search Term Begin taxes Search Term End and insurance premiums, or for any other purposes, in connection with a subordinate Search Term Begin mortgage Search Term End loan, except where escrows for such purposes are not being maintained in connection with the Search Term Begin mortgage Search Term End loan superior to such subordinate Search Term Begin mortgage Search Term End loans.

[Anonymous]

Certain government backed mortgages (all FHA and some Fannie Mae) require escrow for insurance and property taxes so some of you may not have an option.

We have ours separate which I prefer.

[Anonymous]

If you have a choice and choose to escrow, you probably also choose to arrange your withholding so you get a tax refund each year. No self discipline.

[Anonymous]

I always cancel our escrow because if I have to follow up and make sure the bills got paid by the mortgage company then I'd rather just pay them myself and know they were paid on time.