How many months of tax into the escrow account? (loan, real estate, property tax)

[Arcadio]

Hi,

Who decides on how many months of property tax goes into the escrow account? Is 10 months typical? Can I demand fewer months?

Thanks.

[Bette]

I'm a mortgage broker in Florida so I'll explain from this state's perspective:

Taxes are due November 1st (2008) for the 2008 year.

If you were to close by May 31st of this year, your first payment would be due July 1, 2008.

The bank will escrow 9 months at this time. On a purchase, you will see money credited back to you from the seller (page 1 of the closing statement).

Taxes (real estate) are paid in arrears; homeowner's insurance is paid in advance. You will be required to obtain 1 year's worth of insurance to be paid at closing or prior to closing. The bank/lender will escrow approximately 3 months for the insurance.

Hope that helps!

If, for some reason, you do not escrow, the bank/lender can charge you an escrow waiver fee.

[Bette]

This is calculated by the lender when the closing package is drawn. Exact figures aren't known until then b/c there's also something called aggregate adjustment which is a credit to you based on the loan risk, credit, etc.

[TimtheGuy]

Depends on what state your in and when taxes are due. Lenders are regulated...they can't hold too much back.

[sgresident]

Why don't you check about being able to pay your own taxes and not having them escrowed and part of your mortgage payment each month?

[TimtheGuy]

Originally Posted by sgresident

Why don't you check about being able to pay your own taxes and not having them escrowed and part of your mortgage payment each month?

Many loans require escrowing. There is also a charge to the borrower for not escrowing of 0.25% of the loan amount. Lastly, many people want or need to escrow as they either like the convenience or can't discipline themselves to set aside $ for taxes and insurance.