out of pocket or escrow home insuance?

[amarowsky]

Was reading a post earlier and became curious. I heard someone say they pay their insurance upfront instead of through escrow. What would be the benefit of this really?
Only benefit I could see would be less monthly payments traded off for two lump sums. Any decent benefit that anyone gets from this?
Just curious if I could benefit at all from this .

[bjl584]

I pay taxes and insurance up front simply because I don't trust my lender to do it for me.

[YLTL_Dan]

I put mine in the escrow so I don't have to mess with it. Sure, there's a chance they could mess it up, but I always check to make sure the payment dates and amounts correspond (I guess that means I still mess with it!).

[phantom]

My husband and I were required to have an escrow when we first bought our house, but we decided not to get one when we refinanced. Without an escrow, we have three payments a year, home owner's insurance, county property taxes, and municipality property taxes.

One advantage of not having an escrow is that you get to keep your money until it is actually due. Given current savings account interest rates, this isn't much of an advantage. But, I like holding money till its due on principal.

I also like actively controlling my payments. It takes some planning to make sure the money is available when it's needed and little extra work to make sure the bills actually get paid. But, I like the awareness of where my money is going that it forces upon me, and when a bill is wrong, it's easier to notice and sort out. I had to sort out an incorrect tax bill back when I still had an escrow, and it was a major pain.

[MonkeyMama]

I pay taxes and insurance up front simply because I don't trust my lender to do it for me.

Exactly.

I have seen way too many screw-ups when it comes to escrow. & even if they are rare, they can cause serious problems when insurance gets dropped and county comes after you for unpaid property taxes.

Having *no escrow* usually costs us a higher interest rate, but it is worth not dealing with *all of the above.* When you pay off your mortgage, you have to take care of this stuff yourself anyway. Might as well get used to it.

[Max G]

I would say for most regular people having an escrow is a good idea. Financial discipline is not easy to come by and having extra money "burning a hole in a pocket" might lead to some bad choices. At least with escrow people are forced to pay more every month so they can't spend it on stupid things. Obviously, since you found this forum, you already ahead of "regular" people but still, if you are going to be paying yourself it's one more thing on your plate to worry about. I know posters mentioned that they don't trust their bank to do it right. I never had a problem with a bank that I couldn't resolve and I would question their decision to have a loan with a bank who they don't trust in a first place

[elessar78]

I get a discount for paying insurance up front.

[amarowsky]

I get a discount for paying insurance up front.

Could you give a tough percentage of the discount ?

[elessar78]

Could you give a tough percentage of the discount ?

It'll be a ball park, because my auto and homeowners are bundled together but I would say it's ten percent. I can give you a more accurate picture in a day or two.

[MonkeyMama]

It'll be a ball park, because my auto and homeowners are bundled together but I would say it's ten percent.

?? We have insurance discounts for bundling our policies, but we still get separate bills for auto and home - Escrow would not change that. Perhaps this depends on the insurer.

[elessar78]

?? We have insurance discounts for bundling our policies, but we still get separate bills for auto and home - Escrow would not change that. Perhaps this depends on the insurer.

Possibly. The more things we bundle in with our insurance (home, life, and auto), the more of a discount we get. If we pay all our premiums up front, we get another discount.

[kork13]

I pay my insurance upfront so that I can put it on my credit card for cash back. I suppose I *could* pay each month by credit card as well, but it's easier to do it at once and know it's paid. I can pay it in full upfront out of the monthly cashflow, so I figure why not just have it done and covered?

[woodie96]

I'm currently in the process of refinancing and there was one of those disclosure forms stating that since we were below a certain percentage of house to loan value, we could opt to pay our own insurance and taxes, that would however include a fee, i think of 1/4% on the loan.
Their stated rationale was that the company used it as a means to get folks to keep the insurance and escrows in the payment, because if someone let their insurance lapse and had a loss, then the bank would be out their collateral.

So it made sense to me.

[Petunia 100]

I like having the escrow account. It makes my life a little bit simpler, and I am all for that that. It is true that sometimes errors are made, but errors can happen if you don't have an escrow account. I've never experienced an error, maybe my tune would change if I did.

In my state, California, mortgage servicers are required to pay interest on escrow accounts. The interest rate seems to be very competitive too, I earned $24.xx last year, and my average balance was about $1200.

[BuckyBadger]

We didn't escrow anything, but when we refinanced they wanted us to escrow taxes and I didn't feel like arguing about it. I like not escrowing insurance because I have all my policies together (home, auto, umbrella) and it's easier for me to pay them all at the same time.

With the new house, we're escrowing taxes but not homeowners insurance. If we had put less than 20% down, though, we would have had to escrow the insurance, too.