Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Banks and the Escrow Float
Old 11-08-2007, 02:30 PM   #1
Recycles dryer sheets
 
Join Date: Sep 2004
Posts: 330
Banks and the Escrow Float

Since most homeowner taxes are paid (due) at the end of the year, why do homeowners let banks voluntarily hold all this money for a year interest free? I dread calculating the amount of interest bearing float all the banks make over the 11 months before they have to ante up. Have any of the mathematical posters thought about/calculated this HUGE windfall(no labor involved) for the financial institutions.
__________________

__________________
ferco is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-08-2007, 02:41 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
It is not insubstantial. I got my bank to forgo the escrow after I had been a good boy for 6 months and they screwed up the insurance part of it. But there is talk of forcing banks to have tax and insurance escrows collected in order to "protect" borrowers.
__________________

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
We don't have escrow for taxes/insurance with our Wells Fargo home mortgage
Old 11-08-2007, 03:28 PM   #3
Full time employment: Posting here.
sailor's Avatar
 
Join Date: May 2005
Location: Atlanta suburbs
Posts: 881
We don't have escrow for taxes/insurance with our Wells Fargo home mortgage

Is it really common to agree to an escrow?
When we applied for the mortgage I said I'll pay insurance and taxes and they did not press the issue.
__________________
sailor is offline   Reply With Quote
Old 11-08-2007, 03:47 PM   #4
Full time employment: Posting here.
Darryl's Avatar
 
Join Date: Mar 2007
Posts: 577
Huh here is a ball I've dropped

Do I have any leverage to get them to wave the escrow and let me handle the taxes & Ins or is begging followed by a denial the most common practice.
__________________
I highjacked a rainbow and crashed into a pot of gold - Bon Jovi
Darryl is offline   Reply With Quote
Old 11-08-2007, 03:58 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,193
I said that too, and they actually tried to charge me a fee for the privilege, something like $250. They gave some story that the default rate was higher for people who paid their own taxes so they had to charge the fee to make up for it. I'm pretty sure I argued hard enough to get it dropped. It was either that or some other bogus fee that didn't show up on their original estimate but did on the settlement papers I got a couple days before closing. Whichever one it was, I asked my realtor about it later and she said it was normal in Texas, but by that time the lender had already agreed and removed it.
__________________
RunningBum is offline   Reply With Quote
Old 11-08-2007, 04:00 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,193
Quote:
Originally Posted by Darryl View Post
Huh here is a ball I've dropped

Do I have any leverage to get them to wave the escrow and let me handle the taxes & Ins or is begging followed by a denial the most common practice.
Once you've got 20% equity you should be able to get them to drop PMI. If you're counting on increased value of your house to reach that, you need a new appraisal. At the same time you can ask them to drop escrow. I'm pretty sure I've done this with an existing loan before.
__________________
RunningBum is offline   Reply With Quote
Old 11-08-2007, 04:00 PM   #7
Full time employment: Posting here.
MikeD's Avatar
 
Join Date: Apr 2003
Location: Leesburg, VA
Posts: 805
We had a choice when we got our current mtg: let them escrow or pay a $600.00 fee to get out of it. We let them do it.

Our rate is 4 5/8%.

Mike D.
__________________
MikeD is offline   Reply With Quote
Old 11-08-2007, 04:08 PM   #8
Full time employment: Posting here.
Darryl's Avatar
 
Join Date: Mar 2007
Posts: 577
Quote:
Originally Posted by RunningBum View Post
Once you've got 20% equity you should be able to get them to drop PMI. If you're counting on increased value of your house to reach that, you need a new appraisal. At the same time you can ask them to drop escrow. I'm pretty sure I've done this with an existing loan before.
I've got about a 50% equity position, there isn't any PMI but I do pay taxes and insurance into escrow.
__________________
I highjacked a rainbow and crashed into a pot of gold - Bon Jovi
Darryl is offline   Reply With Quote
End of escrow
Old 11-08-2007, 04:08 PM   #9
Recycles dryer sheets
 
Join Date: Dec 2006
Posts: 162
End of escrow

My bank would not let me do it initially, but said I could when my loan to value ratio hit 30%. I am not sure if they factored in appreciation, but since we had put 20% down, when my principal payments added up to the other 10% I called them and they quickly agreed. I was always amazed that states do not require lenders to keep escrow money in interest-bearing accounts.
__________________
firewhen is offline   Reply With Quote
Old 11-08-2007, 04:18 PM   #10
Full time employment: Posting here.
Darryl's Avatar
 
Join Date: Mar 2007
Posts: 577
Guys I was just on the phone and customer service reps went home 17 minutes ago. I'm on this though and will let you know how I do.
__________________
I highjacked a rainbow and crashed into a pot of gold - Bon Jovi
Darryl is offline   Reply With Quote
Old 11-08-2007, 05:57 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,951
Good post on a blatently overlooked subject. I always considered this to be a racket. If they require an escrow, they should pay interest on it. When I did have an escrow, it was always too high or too low. All sorts of arcane "rules" to simply discourage homeowners from paying thier own. 99% of homeowners simply go along, or in the throws of getting the mortgage done, don't want to fuss about the escrow. Some, like my in-laws thing the bank is doing them a favor! I've had originators swear it was impossible...simply because they had never been asked about it. In our county we get additional float of 4.5 months as they let us defer 1/2 for 3 months and the 2nd half for 6 months interest free. I live in a high tax area, so it would burn me up to have those funds sitting until the bill hits. Paying your own really makes you THINK about what you're getting for your property tax dollar, too! $600.00 to forego escrow is a lot, but it's still worth it. I hope its a one time fee. I've had several mortgages with GMAC and they were always good about me paying my own.
__________________
jazz4cash is offline   Reply With Quote
Old 11-08-2007, 06:16 PM   #12
Full time employment: Posting here.
Lakedog's Avatar
 
Join Date: May 2007
Posts: 654
I have never had an escrow account -- when shopping for a mortgage, this is one of the first things I ask, and I have never paid a fee to go without an escrow. Always seemed like a racket to me. Of course, I have no plans to ever have a mortgage in the future.
__________________
Lakedog is offline   Reply With Quote
Old 11-08-2007, 06:20 PM   #13
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,934
I paid $200/month for taxes and insurance over the four years that it took me to pay off my mortgage, after buying my house. That wouldn't have been enough to do much with, so if I had been saving it for these payments it would have been in my savings account.

Assuming that my savings account paid 4-5% interest, I figure that I would have earned a total of about $200 in interest over that four years ($50/year, or $4.17/month).

Unfortunately, my savings account interest rate was much lower in 2002 than it is now, and I remember distinctly that I was earning a whopping 0.2% interest at the time.

Frugality is great, wherever you are willing to cut back. I'm not sure it would be worth the effort, to me.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 11-08-2007, 07:45 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,626
For folks who do not escrow and think they don't pay a fee ... do you know that you probably have a higher mortgage interest rate because you don't escrow?

Next time you refinance, see if you get the same rate if you don't escrow. Or negotiate a rate without escrowing, then ask, "OK, if I escrow will you drop the rate?"

We don't escrow and we think it helps immensely with tax planning.
__________________
LOL! is offline   Reply With Quote
Old 11-08-2007, 09:03 PM   #15
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,951
Quote:
Originally Posted by LOL! View Post
For folks who do not escrow and think they don't pay a fee ... do you know that you probably have a higher mortgage interest rate because you don't escrow?
.
What would be the basis for such a broad statement? I've never ever seen any evidence of any difference in rates for escrow vs. non escrow. I've only heard some originators hint that there could be a fee for a non-escrow or. I have a firm belief that if your business is desireable and they wish to be competitive, it's probably more of an issue for the broker or servicer.
__________________
jazz4cash is offline   Reply With Quote
Old 11-08-2007, 09:08 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,951
Know escrow rules before waiving them
__________________
jazz4cash is offline   Reply With Quote
Old 11-09-2007, 08:42 AM   #17
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 2,424
When we bought our house in 1983 the escrow was required. It was our first home, we put down 25%, but I never thought to ask if the requirement dropped after you reach a certain equity percentage.

Every year the mortgage payment would adjust for escrow shortfalls. Taxes would go up in January and our adjustment would be in June and we'd already be behind and they'd increase our payment. Then after having the mortgage for over 10 years they decided that instead of the escrow being for just what was estimated to be needed they increased the escrow to included a 2 month cushion. So that was spread out over the next 12 months.

One time the escrow took a big jump and when I tried to verify their figures I couldn't get it all to reconcile. I called to ask about it and it turns out they had paid our Real Estate taxes twice. After they corrected for that our escrow made sense.

As soon as we paid off the mortgage I set up an online savings account and send a payment to ourselves every month for 1/12 of the annual taxes and home owner's insurance. It's a good habit to keep but now the interest is ours instead of the mortgage company.
__________________
Sue J is offline   Reply With Quote
Old 11-09-2007, 08:45 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,515
My husband was on top of this - particularly to drop the mortgage interest coverage ASAP. Once we reached the equity requirement, we took over the taxes and dropped the PMI. I don't remember any extra fee for this, in fact I'm positive there wasn't.

Audrey
__________________
audreyh1 is offline   Reply With Quote
Old 11-09-2007, 08:49 AM   #19
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
I had an escrow account on the first mortgage I ever had back in 1989. After that, I've never had one since. I'm enough of a control freak about my finances that I don't want to surrender any control if I don't have to.

Of course, now I don't have a mortgage so it's moot, but when I did I had my insurance debited monthly, and each time I had a few extra bucks at the end of the month (or got a bonus check) I put some money into a separate savings account earmarked toward paying the annual property tax. That way I could pay the bill without flinching...much.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 11-21-2007, 08:29 AM   #20
Full time employment: Posting here.
Darryl's Avatar
 
Join Date: Mar 2007
Posts: 577
Well, I talked with the CCO rep and she tells me the only way to disconnect the escrow and handle it myself is to refinance in to a non-escrowed loan.

If the rates drop another % I'll take a look at that.
__________________

__________________
I highjacked a rainbow and crashed into a pot of gold - Bon Jovi
Darryl is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
online banks bobbee25 FIRE and Money 16 07-12-2007 10:27 AM
credit card float zuki FIRE and Money 2 10-03-2005 07:12 PM
how does the credit card float actually work in regards to billings ? zuki FIRE and Money 10 09-15-2005 12:41 PM
What are the Banks thinking? ESRBob Other topics 4 12-20-2004 06:38 AM
Purchase Home From Banks? Tommy_Dolitte Young Dreamers 3 10-08-2004 06:47 AM

 

 
All times are GMT -6. The time now is 02:30 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.