Just purchased my first home, I have an escrow account. Can I pay more money into account to lower payment?

Question

Monthly payment is 643. including escrow expenses. If I have extra money to put towards escrow, will it reduce my monthly payments?

Answer 1

No. You can apply the extra amounts towards principal but you cannot overfund your escrow to reduce your payments. Legally Banks and mortgage holders are only allowed to keep so much in the escrow. It gets analyzed annually and any overage is refunded. Any shortage must be made up.

Answer 2

Actually, you probably can. Ask the lender or mortgage servicing company. Many of them WILL re-calculate your monthly payment based upon an "overage" in your escrow account. I've done this a couple of times in the past.

Another "trick" is to pay your property taxes and homeowner's insurance BEFORE the bills come out. No bill will then be sent to the mortgage company and at next year's reassessment of your escrow account you will have a large overage. You can either take that in cash or let it ride towards the next year's bills. The mortgage company will reduce your payments accordingly. Then repeat the process the next year. This effectively removes you from making escrow payments and is a neat trick if your lender will not let you cancel the escrow account and manage your own taxes and insurance. I did this on my current home for 3 years until I refinanced it. The new lender agreed to drop the escrow requirement and I've been managing it myself ever since.

Answer 3

No, it won't. The escrow is there to accumulate monies throughout the year for the purposes of insurance and property tax payments when due. If you add extra to it, you will merely have either a lower escrow payment next year, or will get a sizeable refund check from the escrow when the taxes and insurance are paid.

You can't actually reduce your monthly mortage payment. All you can do is pay more than is required each month, and then the term of your loan shortens accordingly.

Answer 4

The same amount of money will come out of that account no matter when you pay it, and you aren't getting interest on the money or anything so there is no reason in the world to pre-pay the money that goes into that account. If you have extra money I'd suggest putting it towards the mortgage before escrow, and if you have a reasonable interest rate on the loan maybe putting it into savings (or paying down other debt) before paying off the mortgage loan.

Answer 5

Sorry I might not get your question.

Your payment is based on PITI. Principal, Interest, Taxes and Insurance.

You escrow account pays your Taxes and Insurance. If you pay extra that will lower your payment on the PI side. I dont know what type of loan you have. Its kinda like asking somebody what type of fish is that? When they have never seen a fish.

Im sorry your question is impossible to answer without knowing what loan you have.

Answer 6

escrow is hazard insurance and taxes, If you pay one extra payment a year and on the check in the FOR space write principal only, you can reduce your loan amount and pay it off sooner. When you have the amount of one payment then send it to the lender, to be applyed to principal only. It has to be a full payment that is sent.

Answer 7

you only reduce your monthly payments by paying extra on the principle of your loan. but you can also put extra money into your escrow account as well.

Answer 8

If you pay income taxes, you should generally not prepay a mortgage. Instead, set up an investment account and invest the money in a reasonably safe mutual fund that earns at least as much as the mortgage interest rate costs you. If you do that, you will save on your income taxes and be money ahead.