Middle Class Money

A mostly stay-at-home mom and her husband battle to defeat the debt monster in the face of daily money-hungry dragons.

Tuesday, October 17, 2006

Escrow accounts: Don't believe what people tell you

As noted in a previous post, we saved up and had 20% to put down on our new home. This gives us 3 nice advantages: 1) No PMI, 2) No 2nd higher-interest loan to avoid PMI and 3) No escrow account where someone else is making money off our taxes and homeowners insurance savings. I realize that number 3 could be very risky for some people. Unless you are a dedicatated saver, it would be really hard to have an account of your taxes and insurance mohney just sitting there, begging you to spend it. But, DH and I are good at saving for yearly and quarterly bills, and had managed wihtout an escrow account on our old home just fine.

So, I had a conversation with our mortgage guy before closing that went a little something like this:
Me: We don't want our taxes and homeowners in escrow. We would like to save for them ourselves.

Mortgage Guy (MG): Even though you have 20% in your home, you will have to pay a $400 fee to not escrow for the 1st year of your mortgage.

Me: So, even though it is my right to waive escrow with 20% down, I have to pay for that right?

MG: Yeah, I know, it's ridiculous. Just call after the first year and tell them you're not happy with the service and then you can handle it yourself.

Me: (sick of this entire homebuying experience) Fine.
Then today, I was thinking about how many people screwed us on this path to homeownership, and I thought I'd call the mortgage company now, 3 months into our mortgage, to see if I could cancel the escrow account. I figured there would be some fee, but why not call? It went a lot better than expected. I was told we met all the qualifications to cancel the escrow service... EXCEPT we did not have a 6 month payment history. No fee to cancel, but we had to wait 3 more months. Better than the year our mortgage guy told us. I have my fax all prepared to send out after our January payment has posted. Then, I'll be managing our taxes and homeowners myself, and making money in a high-interest saving account like ING or Emigrant. I'll reserach my options there, and hopefully find one that takes the money directly from our paycheck so I don't even have to think about it. Chalk one up for the little guy.


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