Is it a good idea to put your home insurance into an escrow?
Texas Rose asked:
Some people are telling me yes and some people say that it’s a bad idea because your mortgage company can make your insurance payment late. What do you think? I’m a first time home buyer so I’m so lost. Thanks.
Judson Gammage
Some people are telling me yes and some people say that it’s a bad idea because your mortgage company can make your insurance payment late. What do you think? I’m a first time home buyer so I’m so lost. Thanks.
Judson Gammage
look unless you are below 80% of the purchase price in a loan then you have no choice but to escrow taxes and home owners
I am a mortgage banker in TN & KY
It is generally up to the mortgage company requires in escrow. They pay on time it to their advantage to do so
An escrow actually provides you with a lower mortgage rate. Reason??? Because those monies are used in the interm, as an investment tool for that financial institution.
In theory, it would be better to pay your taxes and insurance outside of the mortgage payment. If you are disciplined enough to do so.
Otherwise, you are providing the financial institution a “interest free” loan for those monies throughout the year. Those monies would be better used in your hands to maintain debt, and other “surprises”.
The fact that the mortgage company pays the insurance payment late is FALSE….. It could happen at times, but is VERY RARE.
I would have your mortgage professional give you a quote both ways. And use the information to determine which way seems more beneficial for you and your family. Keep in mind, there is going to be an interest rate difference.
And the PERSON THAT COMMENTED IF YOU ARE FINANCING MORE THAN 80%, YOU HAVE TO ESCROW THE TAXES AND INSURANCE. IS A COMPLETE MORON…..
It’s probably a good example of why the mortgage industry is where it is today…… IMO people working the fry machine have no business within the financial world…..
Just my two cents.
Been doing it for 20 years with no problem.
Having the lender pay your real estate taxes and insurance allows you the extra benefit of not having to pay those fees in a lump sum once or twice a year. The 12 month payments are much easier to make. The lender is rarely late in making the payments to the insurance company. Don’t worry about it. Most lenders require it, anyway.
Yes, especially if you are not good at saving for big expenditures like taxes and insurance.
The downside is that the lender gets to keep your money interest free for all that time. But many people don’t want to shell out tax money 6 weeks before Christmas.
It is very rare that the lender will pay your insurance or taxes late.
If you have a mortgage an escrow for both insurance and taxes are a good idea. They won’t be paid late. The bills are either sent directly to your mortgage holder or to you. If you receive them you just forward them to your mortgage holder. Having an escrow account means you don’t have to worry about where the cash will come from when it’s time to pay these expenses.