Why were we charged this fee? (insurance, loan, escrow, property tax)

[Rosella60]

can anyone tell me why we were charged $680.00 fee on our loan becasue we chose not to set up an escrow account and pay our own taxes and insurance?

[chet everett]

Because they can. The fact is that there is a also a small risk that idiot borrowers will end up forgetting to pay property taxes and those liens would have priority over even a first mortgage so that is the legal justification for 'insuring' themselves against such a situation...

Really aggravating that lenders seem to be able to get away with anything to fatten their bottom line...

[SmartMoney]

Most lenders charge a 1/4 point premium when a homeowner elects to pay their own taxes and insurance. This is standard because not everyone that elects to pay their own escrows pay them on time. This premium is intended to offset any expenses incurred by those that do not pay on time.

[Modification Specialist]

Originally Posted by Rosella60

can anyone tell me why we were charged $680.00 fee on our loan because we chose not to set up an escrow account and pay our own taxes and insurance?

Rosella

I guys above are right on the point for explaining how and why you are being charged that fee. In the last 10 years. have spoken to people all over the country. Have discussed this topic several times....

The benefits of having escrows...

Having your property taxes & home owners insurance included in your monthly payment,
you qualify for the lower interest right possible.
Instead of having to pay one bulk payment for taxes and insurance - these are broke into 12 smaller payments making it more affordable.
The main disadvantage is having money sit in someone's bank account collecting interest, the bank doesn't have to pay income taxes on your money. Insurance).

The benefits to not having escrows.....

Paying your taxes and insurance yourself. You have a large bulk payment.
You get to keep the interest that accumulates.

Example - a home in Virgina worth $100,000.

Yearly property taxes = $3800
Yearly Homeowners Insurance $800
Total with Saving Account Interest 4600.00 x 1.25% = $57.50
What you would earn in monthly interest = $57.50 / 12 = $4.79 < This is how much you would save monthly????

What ever you pay in propriety taxes and home owners insurance, it is advantageous for you to include in your regular payment.


..

[marcopolo]

I've paid this fee myself, after experiencing atrocious escrow service from a mortgage servicer that caused my homeowners insurance to lapse one time and the following year they overpaid premiums. I won't name names, but it rhymes with BitiBank.

The little fee that drives me completely crazy is $1/month for signing up for autopay. You know that automatic payment reduces transaction processing costs and reduces delinquencies...so they charge you more? My current mortgage company does this.