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Old 08-20-2008, 10:25 AM
 
Location: NW Houston
1,150 posts, read 2,810,154 times
Reputation: 645

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Quote:
Originally Posted by sbhubbell View Post
I've owned three houses...the first one we escrowed our taxes, the second one we decided not to, and the third one we did again. I found it just easier to increase my monthly payment to include my taxes instead of saving it up in my own bank account and paying it in a lump sum once a year. If you are SUPER vigilant and want to make that 2% interest or whatever on your own money, don't escrow. But to me it wasn't worth the hassle not to.
I agree. If you are paying $500 per month in escrow, putting it into a 2% savings account would yield about $55 interest at the end of the year. Assuming you are disciplined enough to set it aside and not create yourself a cash flow crisis, and organized enough to pay all the bills on time and not incur penalties, is it worth it to track and pay all the bills yourself?

I just saw Hammer's post and we are defending opposite positions for the same reasons. I guess experiences vary. I have never called my mortgage lender (yes, it has changed hands a few times) for 8 years and all the tax bills have always been paid. I figure it's worth the $50 to let them deal with it all. If I had to manage the escrow account anyway, then I might as well do it all myself and save the $50.
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Old 08-20-2008, 11:03 AM
 
132 posts, read 523,297 times
Reputation: 54
Though I never owned a home, I heard that some people do it self for 'bunching' taxes. That means, they pay 2008 taxes in 2009 Jan and 2009 taxes in 2009 Dec. That way, in 2009 they have enough to Itemize where as they take Standard deduction in 2008.

This will help only for those who does not have enough to itemize every year otherwise.
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Old 08-20-2008, 11:30 AM
 
Location: A little suburb of Houston
3,702 posts, read 15,923,098 times
Reputation: 2047
Deciding on whether or not to escrow depends on your lender required downpayment to opt out and your own level of self discipline. Regardless of escrow, there will still be some up front costs, especially homeowner's insurance costs. If you do not escrow, you must have the discipline to set up a seperate account (savings account, revolving CD, whatever) and put an amount equal to or greater than what the escrow amount would be into it so you have the money when you need it to pay taxes and insurance. Something else you may need to consider, if you do not escrow, the seller's portion of the taxes will be credited to you at closing (you will NOT receive cash) however, you will still need cash to pay the enitre tax bill come Dec/Jan. So you may not be out the cash at closing...but it does catch up with you. Personally, I do not use escrow.
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Old 08-20-2008, 02:00 PM
 
Location: Sugar Land, TX, USA
759 posts, read 2,837,540 times
Reputation: 232
I avoided escrow, after calculating what the saving were going to be to let the lender hold the $$$ vs. me...I would start losing after 39 months. So I opted to Not have an escrow account. and I was using 3% return!
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Old 08-20-2008, 02:03 PM
 
Location: Katy, TX
1,288 posts, read 4,392,794 times
Reputation: 626
I just wanted to add that some posters have apparently had more hassle with escrow accounts, whereas I had more hassle without. My first loan changed hands a few times and I never had a problem with the taxes being paid correctly. My second and third loans were both with Wells Fargo (we get a phenomenal rate with them because of our relo company) and they have so far never sold the loans and have never messed up on paying the taxes.

As far as "bunching taxes", I guess I'm surprised that anyone who owns a home would have trouble being able to itemize.
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Old 08-20-2008, 02:28 PM
 
Location: Houston
57 posts, read 379,161 times
Reputation: 31
Quote:
Originally Posted by sbhubbell View Post
As far as "bunching taxes", I guess I'm surprised that anyone who owns a home would have trouble being able to itemize.
I've heard of people doing this. It's not that you can't itemize, it's that you can itemize MORE if you bunch. Depends on the numbers. It doesn't work for everyone, but might for some people.

For example, suppose your standard deduction is 10,000. Suppose mortgage interest of 6000, taxes of 5000, and charity of 3000. That adds up to 14,000 in deductions. But you pay taxes for two years in one calendar year, and bunch up your charity as well, you can manage how much each year gets deducted. So instead of 14,000 each year, you end up with: 22,000 - 6,000 - 22,000 - 6,000 and so on. (it's hard to move the mortgage interest) The average is still 14000. But you can deduct 22,000 in the odd years, and the standard deduction in even years. That is, 22,000 - 10,000 - 22,000 - 10,000. That's 4000 more deduction every other year.

A lot of work, and it falls apart if your mortgage interest exceeds your standard deduction since it's harder to bunch it across years. Or if you don't feel comfortable only throwing church envelopes in the basket in even numbered years.
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Old 08-20-2008, 02:38 PM
 
1,580 posts, read 2,851,133 times
Reputation: 2143
Very good points made above. My advice is: if you typically have a good amount of money in saving, and you are capable of managing your personal finances well, and your bank allows it of course, don't escrow. It can cause hassles, as mentioned above. I got into HUGE hassles with my mortgage company when they wrongly estimated my taxes and demanded large payments to my escrow account.

However, if you live more or less paycheck to paycheck, and don't routinely have thousands of dollars in your savings account, OR if you're not really good at managing your personal finances (which can be tricky if you are a first-time homeowner), use the escrow account. Now that our initial problems got sorted out, I find that the escrow account means I have less to deal with: My taxes get paid. My insurance gets paid. I have one bill each month and I know exactly what it will be. I don't suddenly have to come up with thousands of dollars to pay my taxes.

(edited for clarity)
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Old 08-20-2008, 05:18 PM
 
Location: Fort Myers, FL
1,286 posts, read 2,594,674 times
Reputation: 249
ok im taking 5, i cant believe the advice people are giving.
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Old 08-20-2008, 06:16 PM
 
Location: Right where I want to be.
4,507 posts, read 7,824,676 times
Reputation: 3304
Quote:
Originally Posted by brokerdave View Post
ok im taking 5, i cant believe the advice people are giving.

???
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Old 08-20-2008, 06:19 PM
 
Location: Dallas, TX
243 posts, read 1,038,723 times
Reputation: 103
Bank of America is letting us put 10% down with no escrow for taxes required. It is the "no fee, no closing costs, no PMI" loan that they've been offering on television.
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