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I never even considered this......
Old 07-12-2020, 06:54 AM   #1
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I never even considered this......

I am planning on paying off my mortgage around Sept - Oct time frame. I never considered what my options would be to pay the taxes and insurance moving forward. I'm ASSuming that once the P and I is paid in full the loan will be closed by the lender and the annual taxes and insurance (which were paid through escrow monthly) will be all up to me. Can the taxes and insurance still be paid monthly, or is this something that now needs to be paid in full annually?

Sorry......I haven't done any research as of yet. Just thought I'd throw this out as I'm sure there are many on the forum that have paid off a home. This will be my first!

Thanks
Mike
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Old 07-12-2020, 07:00 AM   #2
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Your mortgage holder will be taken off of your county tax records and the bills will come to you directly. You will be required to pay on their schedule.

We receive quarterly coupons once a year from our county.

After payoff, give it a month and then you should verify with your county that their records were updated and that you will receive the tax bills going forward. I have heard of instances when the county did not update their records, property owner did not pay taxes when due, and then penalties and other issues arose.
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Old 07-12-2020, 07:02 AM   #3
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You are correct that once the mortgage is paid off you will be responsible for paying both homeowner's insurance and property taxes.

Once the mortgage is paid, I would contact both your insurance carrier and local property assessor to make sure their records reflect that you, not the bank, should be billed going forward. That should occur automatically, but I would make those contacts just to be sure.

As to homeowners insurance, the payment schedule options will be dictated by whatever options the insurer allow. Your carrier may or may have a monthly premium option. We pay the premiums annually.

As to property taxes, that will also depend upon what your local tax assessor allows. Our local assessor allows taxes to be paid annually or biannually. Again, we pay the property taxes annually.
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Old 07-12-2020, 07:02 AM   #4
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Insurance is easy, I don't know a company that doesn't offer a monthly EFT option. It's up to you to notify them and set it up.


Taxes are different. Our county only offers annual or semi-annual.
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Old 07-12-2020, 07:10 AM   #5
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I haven’t escrowed taxes or insurance for years. I always asked to do it on my own when I discovered errors in accounts.
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Old 07-12-2020, 07:14 AM   #6
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Remember to track the escrow account as you approach and accomplish payoff. You should be due a refund of the escrow balance when you pay off the loan. Unless it happens to be empty due to recent payments they made (not likely).

I pay my homeowners insurance annually (although I think they allow other payment plans) and taxes in our county are due in March and August.
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Old 07-12-2020, 07:42 AM   #7
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Let me congratulate you on this great milestone!!! When I got my deed from the county office, the clerks there gave me a few high fives. How nice. I'll never forget that.

I don't have much to add about mechanics of insurance and taxes to those who mentioned things above. Maybe the one thing I can add is to keep an eye on your county website regarding public information on your deed, taxes, etc.

A final thought. When I passed this milestone, everything accelerated in my FIRE plan. The peace of mind actually helped me save more. It was (and still is) great. I hope you enjoy the same.
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Old 07-12-2020, 07:44 AM   #8
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I havenít escrowed taxes or insurance for years. I always asked to do it on my own when I discovered errors in accounts.
+1 The mortgage servicer always seemed to screw it up so I elected to pay them myself.
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Old 07-12-2020, 07:46 AM   #9
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Insurance is easy, I don't know a company that doesn't offer a monthly EFT option. It's up to you to notify them and set it up.


Taxes are different. Our county only offers annual or semi-annual.
But IME if you pay insurance monthly or quarterly it is more expensive than just a single annual payment... and much more expensive than the time value of money, so we pay all insurances annually.
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Old 07-12-2020, 07:54 AM   #10
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But IME if you pay insurance monthly or quarterly it is more expensive than just a single annual payment... and much more expensive than the time value of money, so we pay all insurances annually.
^^^---this definitely! Just easier to budget, set aside in another account if absolutely necessary. No different that any of my other annual expense or semi annual expenses.
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Old 07-12-2020, 07:55 AM   #11
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I donít escrow either but it should be easy to send 1/12 of the T and I payments to an online account paying ~1% now days. Then just make your payments according to your local tax collector and HO insurance provisions. Our county allows 1/2 payment in Sept and you can defer the rest at no charge till Dec. Most insurance companies I have dealt with charge a fee ~$5 per payment if you choose a payment plan rather than paying the full premium. I pay my insurance in one lump sum using a cashback credit card.

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Old 07-12-2020, 07:58 AM   #12
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In my experience, taxes are usually paid once or twice a year and we pay a discounted amount if we pay them promptly. This is true here in PA and in CA. We pay them once/year.

We get a discount paying insurance twice a year. We could pay once/year, but I donít think there is much savings for us.

Our musical instruments are insured separately and we pay once every 3 years.
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Old 07-12-2020, 08:10 AM   #13
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But IME if you pay insurance monthly or quarterly it is more expensive than just a single annual payment... and much more expensive than the time value of money, so we pay all insurances annually.
That's the same for us, so we pay annually and use our 2% cash-back credit card to do so.
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Old 07-12-2020, 08:28 AM   #14
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Also, be aware that depending on where you live, you may have:
  • State/County Taxes
  • City/Village/Township Taxes
  • School Taxes
  • Sewer Taxes
  • Utility/MUD Taxes
  • and possibly others/special taxes

These various taxes are billed separately in some areas, or all on a single bill in other areas. When you have multiple bills, they may be on the same schedule or they may have different schedules. Taxes can be due annually, semi-annually or quarterly. I've never seen a monthly tax payment schedule. Make sure you know what tax bills you have if you have multiple bills to pay.

ETA: Look at your most recent escrow disclosure from your lender to see what the tax payment schedule should be and what tax bills they ordinarily pay from your escrow account.
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Old 07-12-2020, 08:32 AM   #15
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Have paid insurance and taxes separately for years. Hated escrow balances and payment changes from different mortgage servicers, etc.

We pay insurance twice annually, insurance once annually. Just keeps fees and financing costs down and the administration of getting them paid. My accounting department has also FIRED and put everything on the KISS method.

We do the same with auto insurance.
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Old 07-12-2020, 11:32 AM   #16
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Why not start the process now. Call the mortgage servicer to end escrow and cut you a check for whatever is in the account. Set aside 1/12 of each tax/insurance bill monthly and pay when due (if monthly payments aren't an option). Since you have to contact the county anyway, you have time before the next tax bill is due (School taxes in September) to get the address changed to yours. Call insurance company. An hour of work and you should be all set
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Old 07-12-2020, 11:41 AM   #17
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That's the same for us, so we pay annually and use our 2% cash-back credit card to do so.
Yep, we get a discount on insurance by paying in full annually.
I use my 2.6% cashback CC
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Old 07-12-2020, 12:24 PM   #18
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My insurance company (USAA) charges the same total whether you pay annually or monthly. (i.e. - no discount for annual pay). I have the payments ACH'd from my bank account every month.

Our town collects property taxes in two installments per year - one in July and one in January. There is no discount for early payment. Late taxes are charged 18% interest. My town charges a 2.5% convenience fee to pay by credit card, so I use a check.

One thing that I do is to make a phantom deduction in my check register on the first of every month equal to the round hundred dollars nearest to 1/12th of my yearly property tax bill. For me, that is $1100 per month ( I like round hundreds because the checkbook math is easier). That way, I always have the money reserved on an ongoing basis. When taxes come due, I add a reverse entry for the preceding six months of reserves and write a check to the Town for the taxes.
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Old 07-12-2020, 12:29 PM   #19
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Originally Posted by jpeter1093 View Post
Why not start the process now. Call the mortgage servicer to end escrow and cut you a check for whatever is in the account. Set aside 1/12 of each tax/insurance bill monthly and pay when due (if monthly payments aren't an option). Since you have to contact the county anyway, you have time before the next tax bill is due (School taxes in September) to get the address changed to yours. Call insurance company. An hour of work and you should be all set
Many of the servicers require escrow accounts with loans. To prevent borrowers from missing payments. Not withstanding loan servicers screw ups. I always wanted to be in control of the property tax & insurance payments. I think the escrow requirements became more common in/after the Great Recession. Plus they get a bit of vig on the interest
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Old 07-12-2020, 12:31 PM   #20
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One thing that I do is to make a phantom deduction in my check register on the first of every month equal to the round hundred dollars nearest to 1/12th of my yearly property tax bill. For me, that is $1100 per month ( I like round hundreds because the checkbook math is easier). That way, I always have the money reserved on an ongoing basis. When taxes come due, I add a reverse entry for the preceding six months of reserves and write a check to the Town for the taxes.
I do this with an automatic actual transfer to an online savings account. I know the interest isn't much but the money is set aside and there is an attached checking account for when it's time to make the payment. I started doing this when we paid off our mortgage to substitute for our old escrow account.

Ours is just $320/mo. $255 for taxes and $65 for insurance.
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