Should you let a lender escrow property tax and insurance payments or should you pay those on your own?

Answer 1

Sometimes you do not have an option. The pro side is that you never have to come up with separate funds to pay those. The down side, and I have seen many, is that the lender "forgets" to pay the taxes and insurance and you don't find out until it is almost too late.

Answer 2

I allow my lender to escrow my taxes, I pay each month and at the end of the year they pay the taxes. I don't worry about it and I don't have to come up with a huge amount each year. If they underestimated your taxes that year then they either have you pay the underage at once or they work it back into your monthly payment to pay over time. I had a mortgage where they escrowed the taxes and I loved it, I have it again and it's great. My friends didn't put enough money down for them to escrow the taxes and she has to be sure and save enough money each year to cover them.

I'd escrow them one less thing for you to worry about. Besides when you receive your 1099 from the Mortgage company it will show taxes paid for the past year so you'll know if they've paid them or not. I found out my bank had not paid them when my accountant called telling me the form I sent from the bank did not show how much tax was paid. I placed a call to them and they showed they had not paid them, come to find out the builder had paid them as I had paid him at closing so no taxes were due from me that year, nice thing was the mortgage company gave me back that money.

Answer 3

Aside from preference, depending upon the mortgage and/or mortgage company, it is occasionally "mandated". This means an escrow account is established, and you don't have the option of paying separately. There are two schools of thought when it comes to how you choose to do this. The first, along your lines of thought, is to pay one bill which inherently divides your (estimated) annual bills (taxes and insurance) into "easy to swallow" monthly payments. This also insures the funds are available when the annual bill comes due. In essence, this is a "forced" savings plan. The second is that your (estimated) money (which may or may not be accurate) is sitting dormant, and you could reasonably use those funds to accrue greater wealth prior to the annual billing cycle. This is extremely logical if you're disciplined. In the end, it all primarily boils down to personal preference.

Answer 4

Pay your own. The dangers are:
Lender does not pay in a timely manner and you have problems, also you are losing interest.
Insurance, lender may only pay for minimum coverage. Most dangerous part of this is replacement value. For a small rider fee you can purchase coverage that covers replacement cost of any item stolen or destroyed. Typically insurance will amortize downwards the value of items. If you paid $500 for a sofa two years ago they will only give you the used value, maybe $50.

Answer 5

I prefer paying these items on my own. If you have a choice, do so. You may not get a choice, depending on the lender involved and its requirements. If you ARE required to escrow, watch it carefully to insure that payments are made as agreed by the lender.

Answer 6

It depends on your discipline to save for future bills. Many times it is easier to just pay a predetermined amount each month and have those bills paid by someone else.