Taxes with Mortgage Payments

[AlltheBest]

Does anyone have advice on the pros and cons of having your taxes wrapped up with the monthly mortgage payment? We've done it both ways. Because we always need money, we are short when the taxes are due -- so we escrowed the tax money and pay it monthly with the mortgage. There's got to be a better way.

[Ima saver]

Well my property taxes are due the week before christmas. I put away $100 a week to pay my property tax, house insurance and car insurances plus tags. I just keep a running total in my checking account.

[mjrube94]

A better way would be to open up a checking (or savings) account specifically for your property taxes and home insurance. Take the annual amount you pay, divide by 12, round up a bit to be safe, and automatically transfer that amount into this separate account each month. Pay the bills from there when due. That way, you don't run the risk of commingling the money with your regular funds, where you may be tempted to use it, but the mortgage company doesn't keep it in escrow. (where, by the way, they're allowed to take a certain amount more than 1/12 per month as a buffer).

Also, see if your town and insurance company can automatically draft the amount from your checking/savings account when the bill is due. Then you won't need to worry about it at all. Good luck.

[Ima saver]

I never comingle my funds. I keep a post it note to show how much is in the checking account just for taxes and insurance. I already have 4 checking accounts, so i don't want another one to have to balance.

[RJB1180]

instead of a checking account setup an online savings account to auto draw the fund every month when your mortage payment is due. That way you have created your own escrow account and you, not the bank earn the interest. I know ING and Emigrant direct allow more than one account per login, not sure about HSBC.

[AlltheBest]

Thank you, thank you! I'd much rather earn the interest than the bank. Our one trouble is that where we live the county, village, school, etc. taxes all come due at different times. We'll have to lay out the schedule of payment and just make sure that there's enough in the checking account to cover the varying amount needed.

[Lostsoul33]

We used to run into the problem of not having the tax money. What I did was call the tax department and find out the amount and due date of each bill. I opened up a seperate savings account and I contribute money to that from each cheque. If I have extra money, I put that in too so that I'm ahead of the game. This has worked out well for us.
I know some people do like to have it combined with the mortgage payment but wouldn't there be an extra fee for that from the bank.

[DivaJen]

We have a rough idea each year of what our taxes will be, and we keep that money in the business account, mentally earmarked for taxes.

[tagrims]

I know with my mortgage I actually received a better rate 5.125% by agreeing to escrow.

If I refused to escrow I was looking at a 5.25% rate.


Yea, it's not gaining money being put in a savings account, but the savings was better long-term with the lower rate rather than the $5 a month I would earn in a high-yield savings.

[jmjj215]

I agree with RGB - set up an automatic txfr and get some interest from that money instead of having it sit in escrow.

[cercis]

Tagrims - we had the same deal, plus we were actually going to be charged some sort of fee.

I do foreclosures, so I understand why banks like to escrow. I have 2 properties in foreclosure now that have no insurance and the prop taxes are deliquent. If something happens to the house, or the taxing agency decides to foreclosure, my clients are SOL. Right now, the people are current on their payments, but we're still going to foreclose (well, unless they bring in proof that they've gotten insurance and paid taxes).

This is costing my client quite a bit of money. They don't have a lot of loans, so it isn't worth the cost to pay someone to service the escrow accounts. Right now, the loss-benefit analysis says it's better to just foreclose occasionally. If they had more accounts, escrow servicing could very well be better financially.

[JoyJoy]

Originally Posted by mjrube94

A better way would be to open up a checking (or savings) account specifically for your property taxes and home insurance. Take the annual amount you pay, divide by 12, round up a bit to be safe, and automatically transfer that amount into this separate account each month. Pay the bills from there when due. That way, you don't run the risk of commingling the money with your regular funds, where you may be tempted to use it, but the mortgage company doesn't keep it in escrow. (where, by the way, they're allowed to take a certain amount more than 1/12 per month as a buffer).

Also, see if your town and insurance company can automatically draft the amount from your checking/savings account when the bill is due. Then you won't need to worry about it at all. Good luck.

This is exactly what we do to pay our property taxes and house insurance. We can even pay using a credit card. I imagine that would be okay for BT too. We haven't had to use either one of those options, but it's always good to know.

[shelbylovesmelby]

We also escrow it's easier for us to do. Plus if it's in a savings account somewhere it may be a temptation during those weeks when we are short on bill $ & then end up screwed like others have said by the end of the year.

I also make sure we keep so much in our savings for emergencies & taxes.