Nice surprise from mortgage company

[disneysteve]

I got our annual escrow statement yesterday. You know, the one that typically says, "Your account has a shortage. Please send a check for $xxx.xx and beginning next month, your payment will increase by $xx.xx."

Except that's not what this one said. Turns out we actually have a surplus. Our monthly payment will be dropping by $63.16. Even better, because the surplus exceeds $50, they sent a check along with the notice for $418.53.

I actually overpay the mortgage slightly each month and plan to continue sending in the same amount. Now instead of it being an extra $45.63 it will actually be an extra $108.81.

[Blessed]

Nice!!! Back when we had one we always had the shortage.

[kork13]

That's a nice little bonus, and even nicer that it lowers the monthly expenses a bit.

I'm expecting to get that letter sometime in the next month or so... IMO, it seems that I should have an excess in my escrow account... My current escrow balance is almost $4200, and my annual escrowed expenses are only about $3000 -- an excess of nearly 35%. I know they are allowed/expected to keep a small buffer, but it seems like that should only be 10%-20%... Though I don't know what amount they actually use.

Honestly, I'd prefer to eliminate my escrow entirely... Though I'm not sure if my bank would let me do that after just 1 year under the mortgage. I found the clause in my mortgage that allows me to "request" it, but I'm just not sure if they would approve that request. The only things covered by escrow are my home insurance & county taxes, so it would be exceptionally easy for me to just set that money aside myself then make those 2 annual payments myself.

Besides the simplicity of just making a single payment each month & not worrying about making the payments yourself, is there really any benefit to keeping escrow on your home?

[moneybags]

Honestly, I'd prefer to eliminate my escrow entirely... Though I'm not sure if my bank would let me do that after just 1 year under the mortgage. I found the clause in my mortgage that allows me to "request" it, but I'm just not sure if they would approve that request. The only things covered by escrow are my home insurance & county taxes, so it would be exceptionally easy for me to just set that money aside myself then make those 2 annual payments myself.

Besides the simplicity of just making a single payment each month & not worrying about making the payments yourself, is there really any benefit to keeping escrow on your home?

We got rid of our escrow because I was tired of them sending those adjustment letters. I felt I could set the money aside and pay my own taxes and insurances. I've been doing it for years without a problem. I think we had to have a certain amount of equity in our home in order to cancel our escrow - check with your bank.

[scfr]

Besides the simplicity of just making a single payment each month & not worrying about making the payments yourself, is there really any benefit to keeping escrow on your home?

It seems that for people who spend all the money they have in their wallet or in their bank each month, an escrow account would be the way to go; it's a way to ensure that the money will be there when the bill comes due. But for people who are good at managing their money (like most of the active members on this forum), not having one may make more sense.

Back when we had a mortgage we got rid of our escrow account as soon as we could. Rather than paying in every month, we preferred to keep our money in the bank earning a bit of interest and then pay our property taxes, HOA dues, and insurance ourselves. Besides the interest earned, we got a discount by paying our HOA dues annually instead of monthly. I don't remember about the homeowner's insurance, but it's possible we got a discount there too.

[disneysteve]

Besides the simplicity of just making a single payment each month & not worrying about making the payments yourself, is there really any benefit to keeping escrow on your home?

That's always been my thought. Sure I can pay the bills myself. I'm quite capable. But why? It doesn't cost any extra to escrow. It isn't like I'd be earning much of anything in interest by holding the money for a few months.

[HappySaver]

We've always had the escrow with our mortgages. Our current mortgage actually charges slightly extra if you don't have escrow, but even if they didn't (I don't think our first mortgage did) I just appreciate the convenience of them paying the tax/insurance bills. As long as it doesn't cost us extra, it's just simpler this way. Agree with Steve that the negligible amount we'd get in interest doesn't make it worth it.

Now that it is totally paid off, I pay the taxes/insurance on our rental home. I have reminders set up so I don't forget to pay quarterly. I'm more likely to forget to pay a quarterly/annual bill, than a monthly bill.

[humandraydel]

My payment also went down....by 1 cent. I couldn't believe they bothered to adjust for that.

[dfeucht]

That's always been my thought. Sure I can pay the bills myself. I'm quite capable. But why? It doesn't cost any extra to escrow. It isn't like I'd be earning much of anything in interest by holding the money for a few months.

I used to earn 5% on that money not so long ago (6-7 years, although it every day it seems like it's been an eternity), so perhaps that will come back some day.

I always being forced to have the 3-6 month buffer, when I only have to old a 1-2 month buffer when I hold it myself. I know eventually I get that 2-4 months back, but it was a psychological thing.