To escrow or not the property taxes? (foreclosure, 5%, investment)

[osjo73]

Anyone have any pros/cons to using the escrow for property taxes? Ofcourse this is with putting 20% down....I am preparing to purchase and pondering just putting the money in a cd to mature when the taxes are due...and continue to pay monthly in a personal account just to stay in the practice of saving the money. Thoughts for or against.....cds/mm are pretty good around 4 to 5%...Thnaka

[2bindenver]

Depends on whether the interest rate changes if there is no esrow. And if there is how much.

I always believe it is in my best interest to hold onto my own money for as long as I am able.

[osjo73]

what interest rate? 30 year fixed for the loan if that's what you mean.

[2bindenver]

Yes, the interest rate. For example your loan officer tells you that you have a 5.875 interest rate. And when you ask about the no escrow option, the rate is now 6.125.

Find out. You need to decide if it is worth it to you.

[RickMG]

For those watching this thread (doesn't seem to apply to you). One of the biggest things to consider in addition to what 2bindenver said is this. No matter what your interest is, do you have the means and the will power to save the money you will need for that tax bill at the end of the year without getting a cash advance? If you do, then bargain with the loan person. If your credit is very good they can (and most will) keep the rate the same or at least very close to an escrowed account. If they won't match, I would say escrow. The amount you put in every month won't bring you back a big return on that money.

[osjo73]

Really????? I did not know that. Even if I am putting down 20% and they see that I have the extra cash in my savings account? they will up the interest rate? I am pretty good at saving what I have to...and I have the will power to not spend it. I'll be sure to ask my lender.

But a very good point to bring up, I have had friends in the past buy in California a small condo for 300K pushing their limit. And then complaining when a bill came in the mail in 6 to 8 months. And to make it worse, the realtor did not explain that the estimated property taxes were taken from the previous owners purchase price...and we all know how the prices appreciated out there. so the extra money was a shock. I had purchased a condo myself, and did not even understand the connection between property taxes and property value...but I had an escrow, so the shock was not as bad.

[NYtoVT]

At least in my former neck of the woods (New York), the borrowe did not have a choice as to tax escrow. The lender forced you into an escrow account with the stated reason that they wanted to protect their investment (mtg) by making sure the taxes were paid. The real reason, as we all know, is the bank uses your escrow payment each month along with hundreds of others to lend short term.

[FLPL75]

I don't escrow
I figured out monthly how much our taxes are and transferthat amount into our money market account.
last year I put the full tax amount into a CD that came due the month the taxes were due.
I was in the credit/mortgage/foreclosure business and to many times I saw bank pay the taxes late. We get a discount if we pay by a certian date.
Plus with my credit background I am not comfortable with putting my credit in anyone elses hands.
but again I am jaded
karla

[osjo73]

Originally Posted by myfask

I don't escrow
...I put the full tax amount into a CD that came due the month the taxes -karla

Can they change the tax due date on you? Or is it the same each year....?

Thanks

[FLPL75]

taxes are due by march
the way it works here is if you pay by end of november you get a discount
end of december you get a smaller discount
and so on
I like to pay by the end of nov to get the best discount.

karla