I never even considered this......

[wrigley]

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

 

[njhowie]

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.

 

[WyomingLife]

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.

 

[Stormy Kromer]

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.

 

[COcheesehead]

I haven’t escrowed taxes or insurance for years. I always asked to do it on my own when I discovered errors in accounts.

 

[PaunchyPirate]

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.

 

[JoeWras]

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.

 

[pb4uski]

I haven’t 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.

 

[pb4uski]

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.

 

[bobandsherry]

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.

 

[jazz4cash]

I don’t 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.

Congratulations “Hi Five Emoji here” !!

 

[EastWest Gal]

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 don’t think there is much savings for us.

Our musical instruments are insured separately and we pay once every 3 years.

 

[LOL!]

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.

 

[MissMolly]

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.

 

[Montecfo]

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.

 

[jpeter1093]

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

 

[Sunset]

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

 

[Gumby]

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.

 

[Scrapr]

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

 

[Sue J]

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.

 

[Katsmeow]

I never escrow for taxes and insurance even if I have a mortgage. I like having control and making sure that only the exact amount is paid.

For taxes, I just have an idea of what it will be and make sure I have enough money when it is due.

For insurance, sometimes there is a discount to paying it all at once or by the six months. Sometimes there is no substantial discount. So, I just look at what is most advantageous at the time and choose that. On the insurer's website I can change how I pay (anything from monthly to annually) any time I want to.

 

[MrsHaloFIRE]

Tax bill divided by 12, sent to savings automatically each month. Reminder on calendar to cut/ mail check 30 days before tax bill due. Draft back from savings to replenish till.

Homeowners, lumped with all the other insurances paid as spread out as they will allow me with no penalty. On autpay monthly out of the till

 

[Walt34]

I haven’t 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.

+2

That was my experience also when I had a mortgage. Every year I'd get nastygrams from the insurance company and the County that the bills hadn't been paid on time. While I was never penalized for their screwups, when I refinanced for a lower interest rate (this was late 1980's) I asked "Do I have to have the taxes/insurance escrowed?" and the answer was that I did not. Since I knew about what the bills would be it was a simple matter to put 1/12 of that amount aside every month and then pay it when the bills arrived.

 

[Cobra9777]

We pay insurance once per year, which is the cheapest option. It goes on the Fidelity 2% cash-back credit card.

Property tax is also paid once per year. I'm not aware of any other options in Texas. We have 3 taxing jurisdictions, but it all comes on one bill from the County. They charge more than 2% to pay by CC, so that's one of the few items we pay with online bill-pay .

I hated escrow accounts. Our last mortgage was originated in 2004 and had no escrow, but it took some negotiating to get it removed. DS's mortgage company required escrow if LTV > 80%. DD is shopping for a mortgage right now with >20% down. Some companies are telling her that the interest rate is higher if she opts out of the escrow requirement. It's become a profit center.

 

[jollystomper]

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

For some lenders, it depends on the ratio of the outstanding loan to the house value. If you request to not use escrow, if the outstanding amount is low enough and the value of the house high enough, some will end the escrow account. Our original loan had an escrow account, but when we refinanced, due to the above items, it was not required and the lender gave us the option of having an escrow account or paying the taxes/insurance ourselves.