Wednesday, March 17, 2010

Escrow or Not?

I am sure many of you reading this blog are home owners like my husband and I.

In fact, this is our 2nd home. When my husband took a job in Cincinnati, we moved down here and had to sell our 1st home together and buy our current house.

The difference for us was that our mortgage with our 1st home did NOT require us to keep an escrow account. So, we didn't. We, of course, had heard of escrow accounts and knew many people had them. But when our bank gave us the option, we said, "No Thank You!"

Well, then we moved and shopped around for the lowest rate, of course. But low and behold, an escrow was required. Ugh! Nothing to be done, so for the last 6 years we have had our own money tied up in an escrow account while the bank makes money on our money.

In the last few months, our bank was taken over by another and our loan has now been moved over to a new banking establishment. Today they send me our Escrow Account Review and while looking over all the numbers I thought, "Does this bank require an escrow, too?"

I called.

If you meet certain criteria, you do NOT need to keep an escrow account. And, we met them! Yay!

So, what are my reasons for wanting to bypass the whole escrow account?

Each month, we pay over $400 in escrow. This money sets in an account the bank manages. Instead of sitting in my own interest bearing account where I earn money on my own balance, the bank instead earns. Why would I want that?

On top of that, the bank has kept almost a $2,000 balance in the escrow account during the year. They keep a "buffer" to make sure they can pay insurance and county taxes. That is extra money that is not even going towards those bills but they get to keep it and earn on it.

Now, we will be setting the money aside ourselves and pay our own bills. We earn interest and get to keep the extra buffer to use for other things or to just save.

Do you have an escrow account?

If so, do you believe you can ensure you will set your money aside to pay your insurance and taxes? If so, call your bank today and see if you can cash out your escrow and take care of your own bills. Start earning interest on your own money!

And, don't forget to read about the new High Interest Checking account I am using here. My escrow money will be now be going there to earn us a bit extra.

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April said...

excellent suggestion! i didn't even know it was an option! A few years in a row we've gotten a refund at the end of the year, but still.... that was a 0% interest loan! Thanks for the suggestion!

Carrie @ said...


I know..those checks are great. I used to love when we would get them.

Then, I thought...wait...that is my money! Why am I excited it get it back? Why did they have it in the first place..I am not a fan of Escrow account, obviously.

The guidelines are new bank has in place to allow you to have your own escrow where:

your Loan to Value Ratio had to be below a set percentage

Couldn't have made late payments or missed payments in a set amount of months

And, there could be no bill ( from the county or insurance ) coming in the next 30 days

I believe all banks have different requirements, but worth looking into.

Family Balance Sheet said...

We have never had an escrow, but I forget how we managed not to. We bought the house 9 years ago and have re-fi'd, but fortunately we have always avoided the escrow. Which is fine by me b/c we are fully capable of setting the money aside ourselves in an interest bearing account.


ladygoat said...

I too had no idea no escrow was even an option. Thanks for the heads up!

Snowed In said...

My bank just told me that apparently one of the 32478 papers we signed at closing xx years ago stipulated that we cannot self-escrow ever. Wonderful.

But I appreciate your bringing it up anyway, Carrie, since now I know what not to put on our next mortgage if we ever move again.

Carrie @ said...

Snowed in.

That is VERY similar to what happened when we closed on our last mortgage. But, we did it because the interest rate was great.

IF.....your bank ever sells your mortage ( which may happen in this economy and what happened to us ) call the new bank to check.

It took 6 years for our mortgage to be sold, but thankfully this new bank allows us to self escrow.

Queen said...

I wish we could! We have 3% more to go before we can stop escrow.

Anonymous said...

After our first year in our house (7 years ago) we called the bank and had the escrow taken off . . . didn't like how they were holding our money!! We have managed just fine!! On another note, our county also lets us pay our property taxes quarterly, without penalty, which helps with the budgeting. Just another aspect to check into! Our house insurance, however, changes a fee to spread out the payments, so we pay it in one lump sum once a year, which is hard since we live in FL and it is outrageous! But just another option to check into!

Lisa said...


We do not escrow either. It saves tons of money, because not only is your tax money sitting in that account, there is a padding amount too that is always in that account.

Ugh! We have to fight for every penny we have!


Carrie @ said...


Right there with you. Fight to keep all our money....indeed!


You are almost there! Keep tabs and as soon as you reach that 3% out that escrow.

Anonymous said...

Hi Carrie,

This is a very good point. I was required to have an escrow account on a previous house. It was horrible.

I do our own escrow now and it's wonderful to never have to deal with a bank on this issue and to collect all the interest myself.

I would never want to go back to a bank escrow again!

Nony (A Slob Comes Clean) said...

We refinanced last year and decided not to escrow. I was scared at first, but I really love it. Mainly, I was so sick of them changing our house payment every single year, sometimes down, but sometimes up by about 100/month, all because they wanted that cushion.

We have our bank automatically move it into a seperate account on payday. That account is only for taxes and insurance, and we just set it up to transfer the same amount that the mortgage company had been putting in our escrow acct, so no math was required!

Rose Atwater said...

Hi Carrie!

I never realized anyone could have a mortgage and NOT have an escrow. We have a veteran's loan with the Mississippi Veteran's Home Purchase Board, so it may not be an option, but you can bet I'm going to call and ask! Interest rates are low right now, but low is better than nothing (which is what we get in our escrow!).