[USER]

Looking to close our escrow account with our mortgage lender. The variability in payments every year is annoying – we received a refund last year and this year we are short per the escrow analysis..

Payment is going up $300/month! We do not see the advantage of having this account, but to close the account will cost us ~$800. Is this worth it?

Anyone else deal with something similar? TIA!

[Bill]

Escrow is used to pay insurance, property taxes, and maybe HOA/CDD fees when they come due. The amount collected changes, because insurance rates and property taxes can change every year.

If the escrow is short in one year, they not only have to collect more to cover the shortage, but also tries to collect a higher amount for the expected higher expenses in the coming year.

It is not an exact science. It’s a best guess as to how much will be needed for the next year.

If you try it yourself, you’ll realize that some years you will set aside too little, and other years you’ll set aside too much.

It’s just part of being a property owner.

[Lax]

I would direct my anger amd frustration towards shopping for insurance every year and fix the propert tax fluctuations.

Ours is almost steady now but insurance is different story.

[Twyla]

Check if you are even allowed to. My credit union has mandatory escrow as part of the mortgage contract.

This same contract also stipulated how much surplus they can keep before the are legally required to pay you the overage.

Also, you are notified in advance of increases to your property tax and insurance.

You will have to be extra vigilant when your bills come due to have the money readily available.

The escrow will pay it regardless and you have to pay the amount that is short and get an updated amount to pay to keep up with the increase in cost for the escrowed expenses.

I find that I can budget better with the escrow as I plan for increases when I get the bills.

[Brittany]

We did this. They charged us $433 to close the account. We transfer a monthly amount to a 4.5APY savings account and let it set until the taxes or insurance is due.

[Lori]

We didn’t have a mortgage on our last house and it was super easy to pay taxes—ours were due twice a year. Online payment system.

And I paid our homeowners once a year and had that on auto-pay.

Not sure I’d want to spend the $800 to close the escrow account though, lol. That would eat me up.

Your taxes and insurance will change no matter how you pay the bills, anyway.

[Karen]

I feel people don’t approach escrow properly. The mortgage payment is stable. Your taxes and insurance aren’t, so those needs will still go up.

Benefit of no escrow is to not go crazy trying to figure out their math.

n the surface it doesn’t make sense, but it does if you look at the extrapolation and realize they don’t guess enough on increases.

Keep the money in your Savings, earn your own interest, and don’t forget to pay you tax and insurance bills now.

FYI I just closed out my escrow account.

I knew my payment would change every year and budgeted for it, but it’s more about earning interest on my own money instead of someone else doing so.

[Kara]

Is the $800 a fee or to cover the shortage for your property taxes?
I pay our property taxes and save the money throughout the year.

I don’t mind doing this and appreciate more control over what I save monthly.

We pay once a year, online.

[Nate]

I’ve never heard of a fee to cancel escrow. In the past I’ve called and said we will take care of it, and they said no problem.

[Alicia]

I love not having an escrow! With my insurer, I can pay my homeowners insurance monthly instead of annually, and put it on a credit card (with no fee to do so) to get points/miles. Win-win!

I didn’t have to pay a fee to cancel my escrow though.

[Paul]

Even if you handle your own taxes and insurance, fluctuations are inevitable, which can still be frustrating. Personally, I prefer having my mortgage company manage escrow payments.

If there’s a shortage, I take advantage of their interest-free advance to cover it and simply adjust to the higher payment.

Ultimately, it comes down to deciding when you’d rather deal with the inconvenience.

[Rick]

It’s not hard to take your mortgage statement, it’s escrow rules, and create an excel doc.

Take the property tax and property insurance docs you usually get before the escrow company.

And map it out. Not hard. A surprise happens when you don’t do this.

[Drew]

We just closed our escrow account and we are happy to no longer have the mortgage servicer involved beyond the principal + interest payment, which will never change until the mortgage is paid off.

Servicers often make mistakes that most folks miss and those mistakes can cost you dearly if not caught.

For example, we regularly make extra principal payments and one day we learned the servicer wasn’t properly applying the extra payments and we had 3k of money that needed to be properly applied!

We were happy to have a new lower mortgage balance but we now do not trust the servicer.

May as well take on the responsibility yourself and ensure the numbers are correct.

Most employees at these mortgage service organizations are not educated enough to understand the financial complexities of mortgage products. Want proof?

Call the company 3 times in the same week – you’ll likely get 2-3 different sets of information on your mortgage.

[Andrew]

It is well worth my time for someone else to manage and pay property taxes each year out of my escrow than to do it myself or gain a nominal amount of extra interest in a HYSA or MM account.

I could only see the value if one is super into credit-card hacking for sign-up bonuses, if your county even allows to pay by CC.

[Author]

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