if you chose not to escrow taxes when you purchased your home

Did your bank / mortgage lender charge you a fee for opting out of escrowing tax money?

We don't want to escrow, and our bank charges a $500 fee for this.

Is this normal?

Re: if you chose not to escrow taxes when you purchased your home

We were charged a fee for not escrowing our taxes/homeowners as well. I'm assuming it's because the bank is losing out on the interest income from holding the $$ in an escrow account until the taxes/insurance are paid.

Re: if you chose not to escrow taxes when you purchased your home

I don't think they hold the escrow funds in interest bearing accounts, actually. At leas,t that is what I've been told.

I don't mind paying the fee at all - I just want to make sure they usually do charge a fee for opting out of escrow.

Re: if you chose not to escrow taxes when you purchased your home

Our bank charged a fee but waived it for us. I am not sure of the $$. Maybe, they can waive the $500.

Re: if you chose not to escrow taxes when you purchased your home

I did some research on this and it's normal for them to charge about a quarter of a point for this.

The reason why is that they like to escrow the funds because it gives them the control to pay your taxes and makes them the number one lienholder on your home, if you pay your own taxes and are late, the town jumps ahead of them on the list and if the house goes into foreclosure, they might not get the total amount back.

I couldn't find a good answer about the interest. I'm in finance and every penny gets invested so I just figured that was the case!

We chose not to escrow mainly because our county wanted a full year up front in escrow and I thought that was ridiculous. DH and I are (well, let me rephrase, I am...) good at budgeting/saving/paying on time so we figured it was a good bet. We talked to our friend who works in the town assessors office and she recommended it as well.

Re: if you chose not to escrow taxes when you purchased your home

Re: if you chose not to escrow taxes when you purchased your home

I'm sure it is just to deter people from NOT escrowing. The bank would much rather be certain the taxes are being paid on its collateral.....

Re: if you chose not to escrow taxes when you purchased your home

that bites, i didn't know they charged a fee. but of course they find a way to take more of your money!

Re: if you chose not to escrow taxes when you purchased your home

Could you put the money in escrow the first year and then chang it the following year and pay the taxes on your own?