I bought my house in 2018. I did not set up an escrow account because I wanted to have greater management of my mortgage payments. I already knew I planned on paying down the house faster and wanted to be able to change homeowners insurance easily if my current one is no longer serving me. I pay my property taxes and insurance on my own. To me an escrow account is a more hands off account and you may get some nasty suprises as mentioned in the video. That’s how I easily discerned that my property taxes have increased 20% in 6 years. At this rate my property taxes may equal my current loan payment in 10 years so I will need to move when housing prices are more favorable. I also bought a house far below “my means” so I am easily able to make payments when they come due. You have to have to personality and discipline to take this route.
Almost all mortgage companies require you to escrow now but of all the ones I had they always either overestimated or underestimate your escrow analysis and several of my mortgage companies have paid my taxes late racking up fees they pay it eventually but it's still annoying if you're the kind of person who pays their bills on time because you'll keep getting bills from your county, threatening foreclosure etc.
Thank you for this! I'm working on closing on my first home and was literally looking everywhere yesterday for information on why escrow was set up this way and got so many conflicting answers. Great video, highly informative
buy the cheapest house you could get, do not listen to your real estate agent by buying the max mortgage you qualified for. 9 out 10 times your mortgage will increase every year sometimes significantly. lenders only look at your debt to income ratio at the time of buying, they don't tell you give yourself a cushion for future mortgage you increases.
any general rule of thumb for how much you can expect your mortgage payments to increase by in percentage terms? it would be great to help get an idea how much one can afford.
@@OldFilmCameras financial experts recommend at least 25% of your take home pay. So you can have room for investing, savings and other miscellaneous. Don't be house poor! Don't buy more than you earn or half of your income in housing
Your mortgage principle never changes, that is a locked in payment, when your house gains value, your taxes and insurance price to cover that increase in value increase. That increase is shown in escrow, which increases your monthly payment, but it is not actually your principle mortgage payment changing, it is the amount they are taking and holding until the end of the year when the 5k bill hits for taxes and insurance, mainly because half of America has less than 1k in savings and zero assets...so half of America would loose their houses every year if someone did not handle it for them.
My husband and I don't like to see our mortgage payment go up and down each year and the escrow shortage is horrible!! When we boughht a 2nd house, we paid $200 to take an escrow out of our payment. No more surprises! Everything is in our control! 😊
@@sage1jenn379 we’ve also noticed a lot of people spend money when it’s in their account. Less headaches for those that are not ready to handle it correctly.
@@sage1jenn379 that’s not actually true. It is an escrow account, which means it is not the lenders bank account. Any interest that is collected on the money in the escrow account is paid to the escrow account (you), not the lender. Now that being said, usually the interest is extremely low, so you are better off keeping the money yourself in a high yield savings account and having an escrow waiver, but the thought that the bank is benefiting from the account isn’t accurate. The only benefit they get is more assurance that your big home related bills are going to be paid so that they don’t suffer the consequences of your non-payment.
Paid $500 when closing my refi in 2021 to not have to deal with escrow BS. I get billed directly by State Farm and understand the December & March property tax bill due dates so just budget for it like everything else. Not having to deal with somebody else managing this for me was worth the $500.
Thats what I would've thought. If you have a decent hysa and budget that out for this kind if thing you wont have this issue of the larger tax and insurance balance due. With the problems others are reporting having had with escrow it just seems like a headache
I've had it both ways, funny enough I didn't realize that escrow account accrued interest until recently. Still I'd rather be in control of it and choose how it grows
Been a minute!! 3 questions: 1. When it comes to the escrow surplus, I would assume it is AFTER the 2 month cushion? 2. Regarding dropping PMI, is the 20% based on the initial loan or is appreciation taken into consideration? 3. Can you opt to remove either property taxes OR HOI from your escrow account or is it an all/nothing situation? Hope these questions help others!!
For me, based on personal experience in Texas: 1) escrow surplus was returned (since that’s for prior year) and a new escrow amount was determined going forward. That amount has “2 month cushion” built in. 2) Appreciation was taken into consideration when I asked to drop PMI. I had to choose whether the request to drop PMI is based on 20% equity on original value when the loan was drafted or if the 20% equity is taking into account appreciation. I sent a written request to remove PMI because I think I have at least 20% equity based on appreciation. The lender scheduled an appointment with an appraiser of their choosing to get my house appraised. I had to pay a flat fee for that appraiser. They will only go with the appraisal report from the appraiser they sent so no need to get your house appraised separately. I had the option to also get the appraisal report from the appraiser the lender sent. The lender was extremely slow to remove PMI after all this so I had to constantly call/email them to give an ultimatum that if they don’t remove PMI by the next bill, I won’t pay the PMI portion. They did end up removing before the next mortgage bill. 3) it’s an all in or nothing
My husband and I bought our first house two years ago and the Escrow is really convenient for most things and likely most people but I’m very hands on with our finances and would prefer to do it myself. Two weird things happened this year though in January they cut us a check for an Escrow Surplus and then raised our monthly payment by the same amount divided by 12. Then around the spring they raised our monthly payment a couple hundred dollars a month because of an escrow shortage, not a huge deal for us but extremely annoying because our insurance is due mid July and Taxes in February and September. There would have been enough cash flow to pay them and have extra (I did the math in excel because I was so confused). Just odd to me that they did opposite changes so close together. I personally would have preferred a one time payment to them instead of a monthly increase when our bills did not increase, so we’ll probably have another surplus in January 😅. Has anyone else had similar situations with their escrow? Note: we did call the mortgage company and their explanation was that homeowners insurance was due and oddly enough we received a letter yesterday saying our homeowners insurance needed to be paid or it would be canceled on 7/15. All is taken care of now.
I canceled mine due to losing control of my taxes and insurance. I was just paying what they said till it almost doubled. Should keep an eye on your insurance and taxes
Pay it by yourself, that way you get a discount for a lump sum on both insurance and taxes, and get to know the people at the office. It comes handy when getting a permit.
What happens to the escrow account, when you pay your mortgage off ? If the is any money left in the escrow account account, I presume you will get the money, correct?
This is super helpful! Would love to know if a homeowner waives escrow, if they get the bills directly. It's unfortunate escrow is required for certain types of loans like FHA. I've heard nightmare escrow stories where lenders fail to make payments to the county and insurance company yet money in escrow is somehow missing and in other cases lender makes late payments, causing homeowners to accrue avoidable fees and is left to run around for weeks or months trying to straighten out the mess.
tactic they pull under escrow then the next year they add the balance short from the previous year and add the new bill can make mortgage go up 3 to 500 bucks in a year
Your mortgage principle never changes, that is a locked in payment, when your house gains value, your taxes and insurance price to cover that increase in value increase. That increase is shown in escrow, which increases your monthly payment, but it is not actually your principle mortgage payment changing, it is the amount they are taking and holding until the end of the year when the 5k bill hits for taxes and insurance, mainly because half of America has less than 1k in savings and zero assets...so half of America would loose their houses every year if someone did not handle it for them.
You're right that while the principal mortgage payment remains fixed, escrow accounts adjust to cover fluctuating taxes and insurance. Thanks for sharing your perspective.
Most folks that have less than 20% down are required by the lender to have an escrow account. We made sure we put 20% to not have an escrow account plus paying PMI.
This is where ppl are blind, yrs go by, your monthly payments goes up and 80% dont Realize they can talk thier insurance and taxes down. It gets out of control and end up selling the house
Huh???? Now, you gotta tell me who I need to talk to and what to say when I go downtown to the county tax collector to “talk” aka negotiate my property taxes “down” please do tell!!!!!!
I don't really see a downside to an escrow unless we're talking about property taxes of $50k a year. Then I can see why you would want that money sitting in a high yield savings account or in the market or something. But if we're talking about $3k-$10k in taxes then the small returns on those funds are not worth the headache.
@@MrPregnant3D for me the downside is having to save another huge lump sum of money on top of the down payment and closing costs and 3 months of padding to buy a house. If you can save up enough money to fund the escrow then you can just save money throughout the year and pay your bills semi-annually or annually. Ultimately you should be putting money away in a savings account every month. And you should know approximately how much your tax and insurance bills are going to be. So then you already have money saved away that you can use for it and you're not surprised when the bill comes.
Now look at it percentage wise. 1% of $50k is $500. But 1% of $3k is eventually $500. Yes, it is only $30, but it still is 1% of your total. That is worth something.
@@keywestalert6329 30 dollars a year really isn't worth it. 30/365=.08 cents day. I'm all about saving and investing but my time and peace of mind is worth more than $30/year.
That escrow shortage sucks reason i remove my escrow i got re assessed and had a shortage so i paid the balance upfront and had escrow removed tried to increase my mortgage by 205 dollars a month
Would this apply to new construction homes as well? Like a brand new home sitting on the market and you buy it at the end of the year will the seller pay the prorated taxes?
@@PL876 yes, new or resale, doesn’t matter. Taxes will be prorated so the builder will pay their portion until closing date and you’d pay the rest from closing date onwards.
If someone asks you to not get an escrow account because they somehow feel cheated. That's a true confirmation that they don't know anything about finances. Stop taking advice from them right away
@@WinTheHouseYouLove what I am trying to say is. There is no downside of having an escrow account, especially if the buyer couldn't put 20% down. You do not lose anything with an escrow account. It's just free budget management
Hey, totally get your confusion! In the video, I talk about how some people prefer managing taxes and insurance payments themselves if they're good at budgeting.
I'm gonna pay the tax assessor directly when due so that wont be in escrow, also will be paying the majority of home owner's insurance, the majority or all of it depends on how much they say we will owe once we renew in April. So it will put my mortgage payments at just principal, interest and the $18.10 USDA charges and will put those total fees at less than $300 per month, I can add to my principal more per month.
Not arguing here just trying to understand. So you are saying that you will directly pay the charges (taxes and HOI) which would free up ~300 a month but it’s not necessarily a free up per se since you have to make the payments which would roughly come to 300 a month ? I just want to make sure I’m understanding cause I had an urgent interest to get out of escrow but after watching this video I’m not entirely sure that needs to be priority. Thank you in advance for the civil discourse !
@@hugomunoz5013 By NOT having HOI, Property taxes as part of escrow gives ME more control of MY mortgage. It will put my Principal, interest, monthly USDA fee monthly mortgage obligation at less than $300 a month. I already overpay the principal and have been since the first payment was due knocking YEARS off the life of the mortgage in only 3 years., paying far MORE towards principal than interest which takes MANY YEARS to do just making the agreed upon payments each month. By paying those fees in total by myself, Yes I can add even MORE to the principal each month knocking down the life of the mortgage even more. Once we hit 65 in 6 years property tax FREEZES, Meaning it halts, no more property taxes which means I can add even MORE towards the principal. I for 1 have ZERO intention of dragging out a 30 year mortgage 30 years.
If your taxes are $3k. And you were to place that into a Cd simple 4% easily. You could save $120 for the year or $10/mo. It is worth it to me since the money is being wasted. Add your insurance and baam, saved another $100. Do that to your wife and baam, you got a divorce in 4.32 seconds.
Escrow accounts are typically required by lenders for buyers with a down payment of less than 20%, but they might be optional for those with a larger down payment. It's always best to check with your lender for their specific requirements.
What happens to the escrow account, when you pay your mortgage off ? If the is any money left in the escrow account account, I presume you will get the money, correct?
![Lethal Company Music Video 🎵 "Follow The Orders" [VERSION A]](http://i.ytimg.com/vi/QeooZB4Z7RA/mqdefault.jpg)
I bought my house in 2018. I did not set up an escrow account because I wanted to have greater management of my mortgage payments. I already knew I planned on paying down the house faster and wanted to be able to change homeowners insurance easily if my current one is no longer serving me. I pay my property taxes and insurance on my own. To me an escrow account is a more hands off account and you may get some nasty suprises as mentioned in the video. That’s how I easily discerned that my property taxes have increased 20% in 6 years. At this rate my property taxes may equal my current loan payment in 10 years so I will need to move when housing prices are more favorable. I also bought a house far below “my means” so I am easily able to make payments when they come due. You have to have to personality and discipline to take this route.
Thank you for presenting information calmly and reasonably! So many youtubers in this space give me anxiety just from how they talk!
Almost all mortgage companies require you to escrow now but of all the ones I had they always either overestimated or underestimate your escrow analysis and several of my mortgage companies have paid my taxes late racking up fees they pay it eventually but it's still annoying if you're the kind of person who pays their bills on time because you'll keep getting bills from your county, threatening foreclosure etc.
Thank you for this! I'm working on closing on my first home and was literally looking everywhere yesterday for information on why escrow was set up this way and got so many conflicting answers. Great video, highly informative
Great to hear, thanks for watching!
buy the cheapest house you could get, do not listen to your real estate agent by buying the max mortgage you qualified for. 9 out 10 times your mortgage will increase every year sometimes significantly. lenders only look at your debt to income ratio at the time of buying, they don't tell you give yourself a cushion for future mortgage you increases.
any general rule of thumb for how much you can expect your mortgage payments to increase by in percentage terms? it would be great to help get an idea how much one can afford.
@@OldFilmCameras financial experts recommend at least 25% of your take home pay. So you can have room for investing, savings and other miscellaneous. Don't be house poor! Don't buy more than you earn or half of your income in housing
Your mortgage principle never changes, that is a locked in payment, when your house gains value, your taxes and insurance price to cover that increase in value increase. That increase is shown in escrow, which increases your monthly payment, but it is not actually your principle mortgage payment changing, it is the amount they are taking and holding until the end of the year when the 5k bill hits for taxes and insurance, mainly because half of America has less than 1k in savings and zero assets...so half of America would loose their houses every year if someone did not handle it for them.
My husband and I don't like to see our mortgage payment go up and down each year and the escrow shortage is horrible!! When we boughht a 2nd house, we paid $200 to take an escrow out of our payment. No more surprises! Everything is in our control! 😊
Interest free loan to mortgage companies while the money sits in thier accounts earning money until bills are paid 😅
@@sage1jenn379 we’ve also noticed a lot of people spend money when it’s in their account. Less headaches for those that are not ready to handle it correctly.
@@sage1jenn379 that’s not actually true. It is an escrow account, which means it is not the lenders bank account. Any interest that is collected on the money in the escrow account is paid to the escrow account (you), not the lender.
Now that being said, usually the interest is extremely low, so you are better off keeping the money yourself in a high yield savings account and having an escrow waiver, but the thought that the bank is benefiting from the account isn’t accurate. The only benefit they get is more assurance that your big home related bills are going to be paid so that they don’t suffer the consequences of your non-payment.
Robbery with a smile
Paid $500 when closing my refi in 2021 to not have to deal with escrow BS. I get billed directly by State Farm and understand the December & March property tax bill due dates so just budget for it like everything else.
Not having to deal with somebody else managing this for me was worth the $500.
Thats what I would've thought. If you have a decent hysa and budget that out for this kind if thing you wont have this issue of the larger tax and insurance balance due. With the problems others are reporting having had with escrow it just seems like a headache
I've had it both ways, funny enough I didn't realize that escrow account accrued interest until recently. Still I'd rather be in control of it and choose how it grows
Been a minute!! 3 questions:
1. When it comes to the escrow surplus, I would assume it is AFTER the 2 month cushion?
2. Regarding dropping PMI, is the 20% based on the initial loan or is appreciation taken into consideration?
3. Can you opt to remove either property taxes OR HOI from your escrow account or is it an all/nothing situation?
Hope these questions help others!!
For me, based on personal experience in Texas:
1) escrow surplus was returned (since that’s for prior year) and a new escrow amount was determined going forward. That amount has “2 month cushion” built in.
2) Appreciation was taken into consideration when I asked to drop PMI. I had to choose whether the request to drop PMI is based on 20% equity on original value when the loan was drafted or if the 20% equity is taking into account appreciation. I sent a written request to remove PMI because I think I have at least 20% equity based on appreciation. The lender scheduled an appointment with an appraiser of their choosing to get my house appraised. I had to pay a flat fee for that appraiser. They will only go with the appraisal report from the appraiser they sent so no need to get your house appraised separately. I had the option to also get the appraisal report from the appraiser the lender sent. The lender was extremely slow to remove PMI after all this so I had to constantly call/email them to give an ultimatum that if they don’t remove PMI by the next bill, I won’t pay the PMI portion. They did end up removing before the next mortgage bill.
3) it’s an all in or nothing
My husband and I bought our first house two years ago and the Escrow is really convenient for most things and likely most people but I’m very hands on with our finances and would prefer to do it myself.
Two weird things happened this year though in January they cut us a check for an Escrow Surplus and then raised our monthly payment by the same amount divided by 12. Then around the spring they raised our monthly payment a couple hundred dollars a month because of an escrow shortage, not a huge deal for us but extremely annoying because our insurance is due mid July and Taxes in February and September. There would have been enough cash flow to pay them and have extra (I did the math in excel because I was so confused). Just odd to me that they did opposite changes so close together. I personally would have preferred a one time payment to them instead of a monthly increase when our bills did not increase, so we’ll probably have another surplus in January 😅.
Has anyone else had similar situations with their escrow?
Note: we did call the mortgage company and their explanation was that homeowners insurance was due and oddly enough we received a letter yesterday saying our homeowners insurance needed to be paid or it would be canceled on 7/15. All is taken care of now.
Phenomenal explanation, we had to learn a ton of the things you mentioned on our own which seemed like the hard way 😢
Glad you found the video helpful! If you ever need more guidance, feel free to reach out or explore our resources at www.winthehouseyoulove.com. 😊
I feel like an escrow account is for people who can’t manage their own bills. So having an escrow to do things for you helps them out.
I canceled mine due to losing control of my taxes and insurance. I was just paying what they said till it almost doubled. Should keep an eye on your insurance and taxes
Pay it by yourself, that way you get a discount for a lump sum on both insurance and taxes, and get to know the people at the office. It comes handy when getting a permit.
What happens to the escrow account, when you pay your mortgage off ? If the is any money left in the escrow account account, I presume you will get the money, correct?
Yes, it gets refunded back to you. It is your money after all not the lenders.
This is super helpful! Would love to know if a homeowner waives escrow, if they get the bills directly. It's unfortunate escrow is required for certain types of loans like FHA. I've heard nightmare escrow stories where lenders fail to make payments to the county and insurance company yet money in escrow is somehow missing and in other cases lender makes late payments, causing homeowners to accrue avoidable fees and is left to run around for weeks or months trying to straighten out the mess.
Yes, you would be billed annually for homeowners insurance and bi-annually for taxes.
I've regularly had to pay county taxes even with an escrow account
You need to talk with your lender then, that should not be happening
tactic they pull under escrow then the next year they add the balance short from the previous year and add the new bill can make mortgage go up 3 to 500 bucks in a year
This was a great explanation!
Glad it was helpful!
Very good info. I am closing in the next few weeks. Ty
That's great to hear, congrats on getting close to closing! If you have any questions or need assistance before then, feel free to reach out.
The estimate will always be wrong every yr. Could be few hundred off or maybe small refund
Your mortgage principle never changes, that is a locked in payment, when your house gains value, your taxes and insurance price to cover that increase in value increase. That increase is shown in escrow, which increases your monthly payment, but it is not actually your principle mortgage payment changing, it is the amount they are taking and holding until the end of the year when the 5k bill hits for taxes and insurance, mainly because half of America has less than 1k in savings and zero assets...so half of America would loose their houses every year if someone did not handle it for them.
You're right that while the principal mortgage payment remains fixed, escrow accounts adjust to cover fluctuating taxes and insurance. Thanks for sharing your perspective.
Thank you for educating us!
Just confirming there is not set up or monthly fees for an esc row account? I see an Estimated Escrow amount on my closing disclosure.
Correct. The estimated escrow is your taxes and insurance, not a fee
Most folks that have less than 20% down are required by the lender to have an escrow account.
We made sure we put 20% to not have an escrow account plus paying PMI.
This is where ppl are blind, yrs go by, your monthly payments goes up and 80% dont Realize they can talk thier insurance and taxes down.
It gets out of control and end up selling the house
Huh???? Now, you gotta tell me who I need to talk to and what to say when I go downtown to the county tax collector to “talk” aka negotiate my property taxes “down” please do tell!!!!!!
I don't really see a downside to an escrow unless we're talking about property taxes of $50k a year. Then I can see why you would want that money sitting in a high yield savings account or in the market or something. But if we're talking about $3k-$10k in taxes then the small returns on those funds are not worth the headache.
@@MrPregnant3D for me the downside is having to save another huge lump sum of money on top of the down payment and closing costs and 3 months of padding to buy a house.
If you can save up enough money to fund the escrow then you can just save money throughout the year and pay your bills semi-annually or annually.
Ultimately you should be putting money away in a savings account every month. And you should know approximately how much your tax and insurance bills are going to be. So then you already have money saved away that you can use for it and you're not surprised when the bill comes.
Now look at it percentage wise. 1% of $50k is $500.
But 1% of $3k is eventually $500. Yes, it is only $30, but it still is 1% of your total. That is worth something.
@@keywestalert6329 30 dollars a year really isn't worth it. 30/365=.08 cents day. I'm all about saving and investing but my time and peace of mind is worth more than $30/year.
Is there any fee when you break the escrow account when you reach 20% down?
That escrow shortage sucks reason i remove my escrow i got re assessed and had a shortage so i paid the balance upfront and had escrow removed tried to increase my mortgage by 205 dollars a month
Would this apply to new construction homes as well? Like a brand new home sitting on the market and you buy it at the end of the year will the seller pay the prorated taxes?
@@PL876 yes, new or resale, doesn’t matter. Taxes will be prorated so the builder will pay their portion until closing date and you’d pay the rest from closing date onwards.
If someone asks you to not get an escrow account because they somehow feel cheated. That's a true confirmation that they don't know anything about finances. Stop taking advice from them right away
I don't think I'm understanding what you're saying
@@WinTheHouseYouLove what I am trying to say is. There is no downside of having an escrow account, especially if the buyer couldn't put 20% down. You do not lose anything with an escrow account. It's just free budget management
I still don't understand why your thumbnail says DON'T GET AN ESCROW ACCOUNT
Hey, totally get your confusion! In the video, I talk about how some people prefer managing taxes and insurance payments themselves if they're good at budgeting.
I'm gonna pay the tax assessor directly when due so that wont be in escrow, also will be paying the majority of home owner's insurance, the majority or all of it depends on how much they say we will owe once we renew in April. So it will put my mortgage payments at just principal, interest and the $18.10 USDA charges and will put those total fees at less than $300 per month, I can add to my principal more per month.
This is exactly what I did. It worked out well for me.
Not arguing here just trying to understand. So you are saying that you will directly pay the charges (taxes and HOI) which would free up ~300 a month but it’s not necessarily a free up per se since you have to make the payments which would roughly come to 300 a month ? I just want to make sure I’m understanding cause I had an urgent interest to get out of escrow but after watching this video I’m not entirely sure that needs to be priority. Thank you in advance for the civil discourse !
@@hugomunoz5013 By NOT having HOI, Property taxes as part of escrow gives ME more control of MY mortgage. It will put my Principal, interest, monthly USDA fee monthly mortgage obligation at less than $300 a month. I already overpay the principal and have been since the first payment was due knocking YEARS off the life of the mortgage in only 3 years., paying far MORE towards principal than interest which takes MANY YEARS to do just making the agreed upon payments each month. By paying those fees in total by myself, Yes I can add even MORE to the principal each month knocking down the life of the mortgage even more. Once we hit 65 in 6 years property tax FREEZES, Meaning it halts, no more property taxes which means I can add even MORE towards the principal. I for 1 have ZERO intention of dragging out a 30 year mortgage 30 years.
@@winniethepoohandeeyore2 taxation is theft
15:40 I booked an appointment and nobody called me. Should I just book another one?
Oh no! That's unusual! Please email me and I'll make sure you're taken care of kyle@winthehouseyoulove.com
Excellent information ℹ️👍
If your taxes are $3k. And you were to place that into a Cd simple 4% easily. You could save $120 for the year or $10/mo. It is worth it to me since the money is being wasted.
Add your insurance and baam, saved another $100. Do that to your wife and baam, you got a divorce in 4.32 seconds.
@@keywestalert6329 hahahaha I agree I’d rather save the money on my own and invest it. I prefer lump sums over monthly payments.
What if you buy cash?? 😢
Not all loans have escrow.
Thank you
I thought they were mandatory
Escrow accounts are typically required by lenders for buyers with a down payment of less than 20%, but they might be optional for those with a larger down payment. It's always best to check with your lender for their specific requirements.
What happens to the escrow account, when you pay your mortgage off ? If the is any money left in the escrow account account, I presume you will get the money, correct?
Yes.