Why do some people choose to separate their mortgage, property tax, & home insurance payments and pay all separately to the mortgage company, municipality, and insurance company instead of paying the lender (such as Countrywide) one escrow payment and letting them pay the bills separately? It seems easier to pay one bill instead of 3, and it is the same cost, so…?
Yeah the question is why, thanks for stating the obvious though.
The mortgage company benefits from your escrow account, meaning that you’re allowing them to hold your money, thus they make a percentage off that money, cause it’s in savings. Some people prefer to put the tax and insurance money into their own savings account, so they can make a little off of it, as opposed to the bank.
I’d rather have my own savings account for these things and benefit from the savings rate than have my mortgage company do it. It’s not that difficult to pay taxes and insurance yourself. Everything is done online.
Think about it…if the mortgage company has 100,000 mortgage loans out to people, and each one on average hands over $400 a month for their escrow accounts, that’s $40 million dollars every month the mortgage company holds in escrow for everyone. AND THEY ONLY PAY TWICE A YEAR IF YOU’RE LUCKY. Who’s benefitting from all that money in interest? NOT YOU that’s for sure.
Some people just prefer it that way.
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I think some people dont understand escrow
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The mortgage company benefits from your escrow account, meaning that you’re allowing them to hold your money, thus they make a percentage off that money, cause it’s in savings. Some people prefer to put the tax and insurance money into their own savings account, so they can make a little off of it, as opposed to the bank.
I’d rather have my own savings account for these things and benefit from the savings rate than have my mortgage company do it. It’s not that difficult to pay taxes and insurance yourself. Everything is done online.
Think about it…if the mortgage company has 100,000 mortgage loans out to people, and each one on average hands over $400 a month for their escrow accounts, that’s $40 million dollars every month the mortgage company holds in escrow for everyone. AND THEY ONLY PAY TWICE A YEAR IF YOU’RE LUCKY. Who’s benefitting from all that money in interest? NOT YOU that’s for sure.
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I am quite happy paying my bills myself. When I had a mortgage, I always paid my own taxes. Why pay money into escrow every month when I can just pay it myself. Now that my mortgage is paid off, it’s the same. I pay my taxes every quarter.
I think for some folks that prefer not to budget themselves, it forces them to pay there taxes on time by removing the responsibility…or its a convenience..
And in a state like mine with high property taxes, money in escrow gets no interest on the monthly deposits, so thats money lost unnecessarily.
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we pay our taxes seperate. Banks pay your taxes every 1/2 year or once a year, so they just sit on the money making interest off of it. Why let the bank make extra money off of your money, when you could be doing that. To be honest we’re not really putting aside the money and making interest off of it but at least the bank isn’t making extra cash off of our money.
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Aside from preference, depending upon the mortgage and/or mortgage company, it is occasionally "mandated". This means an escrow account is established, and you don’t have the option of paying separately. There are two schools of thought when it comes to how you choose to do this. The first, along your lines of thought, is to pay one bill which inherently divides your (estimated) annual bills (taxes and insurance) into "easy to swallow" monthly payments. This also insures the funds are available when the annual bill comes due. In essence, this is a "forced" savings plan. The second is that your (estimated) money (which may or may not be accurate) is sitting dormant, and you could reasonably use those funds to accrue greater wealth prior to the annual billing cycle. This is extremely logical if you’re disciplined. In the end, it all primarily boils down to personal preference.
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35 Years in the Trenches