Comments on: What is a Mortgage Escrow Account?

By: Kate Kashman

Kate Kashman — Tue, 06 Apr 2010 22:31:48 +0000

Credit unions offer several advantages over banks and mortgages companies, particularly when it comes to escrow accounts. Many credit unions pay interest on escrow account balances, and their minimum balances are often lower, as well. For example, banks regularly require that the lowest balance in an escrow account be two month’s escrow payment. Some credit unions require no minimum balance, or only one month’s payment.

Also, banks should be able to reanalyze your escrow account at any time. It isn’t rocket science and it is done by a computer program. It is true that the account gets automatically analyzed one time per year but there is no reason that it can’t be analyzed every month. (Though there wouldn’t be any reason to do that.) While I agree that banks don’t always do a great job of making sure that the analysis are as accurate as possible, they are working with last years figures and can’t possibly guess whether your taxes and insurance are going to go up or down each year. You can’t guess, either, but you’ve got a much better chance of knowing than the bank does (if you read the paper, keep up with your local tax situation, and read your insurance documents.) If you see an error in the annual analysis that is sent to you, let the bank know.

By: angela carter

angela carter — Mon, 25 Jan 2010 21:07:16 +0000

Hi last year I had an escrow shortage of 1,000 dollars I pa
id this off when I called to check this month they said I am short $188.00 what is going on why don’t they let you know and my mortgage went up and my home owners insurance went down not understanding this at all.

By: barb

barb — Sun, 06 Sep 2009 03:35:52 +0000

i am getting ready to pay our house payment from new coupon book and i see our house payment went down a little. i paid the reg. payment and then added $20 extra each month to be put in – sometimes escrow – sometimes principle. is this wise? the year before we had come up short on escrow for some reason and our monthly payment had gone up some. btw, math makes me dizzy so please make it real simple. thanks.

By: Nickel

Nickel — Thu, 27 Aug 2009 20:25:08 +0000

Tony: Yes, and I’d be willing to bet that she’s not alone. That’s why I decided to write something up. It’s been my experience that, if one person asks, there are usually many others who are wondering the same thing. Personally, I’m glad that people are willing to ask these sorts of questions rather than being left to wonder.

By: Tony

Tony — Thu, 27 Aug 2009 19:08:34 +0000

Hate to sound like the rude person, but the person really had no clue whether to apply extra payment towards principal or escrow? You figure at loan closing, they would go over your escrow.

By: Bodark

Bodark — Thu, 27 Aug 2009 01:52:19 +0000

Escrow, while well intended, never seem to fit for me. I did it on my first house – came up short at property tax time, thus I had to out of pocket the rest. SUbsequent year PITI went up to avoid similiar outcome.

On subsequent homes, I have done my own escrow. That is to say each month I pay Principal & Interest (and extra principal, but thats for another thread someday). Then I deposit 1/12th of our estimated taxes and home owner’s insurance into a high yeild money market (MM).

This MM, also hold our cash reserves. So we make enough in interest each month to cover a utility bill, and then in Jan each year write the check to the applicalbe tax offices, with annual insurance premiums in June.

It’s pretty simple, and helps with “Paying yourself first”.

By: Paul @ FiscalGeek

Paul @ FiscalGeek — Wed, 26 Aug 2009 15:18:24 +0000

I also find that the escrow account is a great way for your mortgagee to fail at simple math. It definitely pays to keep tabs on the balances and your payments.

By: EZ

EZ — Wed, 26 Aug 2009 14:17:09 +0000

To make the equivalent of 1 extra payment per year you can either pay half the monthly amount every two weeks or increase each monthly payment by 1/12. Make sure to write on the check that you want the extra to go to principal.

By: Hatch

Hatch — Wed, 26 Aug 2009 13:10:57 +0000

“principal, interest, taxes, and insurance”

There are so many things I didn’t realize when I bought my house. I knew I’d be paying $671 for principal and interest and $40 for PMI, but didn’t know about the $226 for taxes and insurance. So the grand total is $937, a good deal more than the $671.