Escrows — pay with mortgage or use to save interest?

Escrows – Pay With Mort­gage or Use To Save Interest?

Why do a lot of lenders not give mort­gages unless you pay them escrows with the monthly pay­ment?  They will not even give you an option. Because they make good use of your money while it is wait­ing for tax time.

There are some lenders how­ever who will give you an option, and if they do, you would be wise to say ‘no thank you to pay­ing escrows, I’ll pay my own taxes’, and here is why.

#1 – Taxes are due twice a year, so if you are pay­ing the bank/lender a por­tion every month, what are they doing with that money? Of course they are invest­ing it and earn­ing them­selves some nice inter­est. They are most likely lend­ing it to some­one else. Maybe you are the some­one else?

#2 – Let us look at how that escrow pay­ment money could be work­ing for you instead of work­ing for the lender.

In this sce­nario let us assume you have some type of line of credit, like a Home Equity Line of Credit or a Per­sonal Line of Credit. Let us also assume you have a bal­ance owing on that line of credit. Because you are charged inter­est on the aver­age daily bal­ance of your line of credit,  wouldn’t it make sense to try to keep that bal­ance as low as pos­si­ble for as many days as pos­si­ble each month? How can you do that when you have no extra money? Here is one pos­si­ble way. Call your bank/lender and say I want to pay my own taxes each year so I am not going to send you escrows with each of my monthly mort­gage pay­ments.  Now some lenders will allow this and some will not, but if they do here is what you do next. Every month, you deposit that escrow pay­ment to your line of credit, reduc­ing the bal­ance and there­fore low­er­ing the amount of inter­est charges you will have to pay each month. This way you are sav­ing up the tax money so it will be avail­able to you when the bill is due but in the mean-time your money is work­ing at sav­ing you inter­est charges rather than earn­ing inter­est for the lender.

#3 – If you do not owe any money besides your mort­gage, then you can put the monthly escrow pay­ment into a sav­ings account and be earn­ing your­self inter­est on it rather than giv­ing it to the bank in which case they are the only one’s earn­ing inter­est on your money.

#4 – There are many other choices you can make that will ben­e­fit you even more than these two exam­ples. See what one client did below.

#5 – A Real Client Tes­ti­mo­nial who decided to can­cel their escrow account with their bank and have the our soft­ware deter­mine the best use of that escrow money for them.

” Just wanted to thank you for the advice you gave me of let­ting your sys­tem han­dle the pay­ing of my real estate taxes by remov­ing the escrow pay­ment from my mort­gage.

Here are the results:

“Before my mort­gage pay­ment was 526.91 with an escrow pay­ment of 372.04 for a total pay­ment of 898.95. At that point I had 5.75 years left to pay off my mortgage.

I removed the escrow pay­ment and now have the your soft­ware han­dling my tax pay­ment by adding a $2200.00 yearly expense for taxes like you told me.

By just doing this, my years left went down to 4.8 years!

So I knocked 9 months off by doing basi­cally noth­ing and just let­ting your  sys­tem man­age my real estate taxes.

I can’t even begin to imag­ine how much inter­est on my mort­gage that is going to save me. This sys­tem is def­i­nitely worth every penny.”

From Peter C’s brother

There are so many dif­fer­ent ways of mov­ing our money and lit­tle sce­nar­ios that can make a huge impact on how fast we pay off our debts and build wealth for our­selves. Our sys­tem is designed to coach and edu­cate each user so they can make the best use of their hard earned dol­lars. What did our sys­tem tell Peter C’s brother to do with his escrow money to have such an impact? Prob­a­bly some­thing dif­fer­ent to what it would tell you to do with yours. Find out by ask­ing me for your cus­tomized, free analysis.

It’s really impos­si­ble to deter­mine on our own what all these scene­r­ios are, and the effect that they could be hav­ing with­out a real tool.  Our finan­cial finan­cial nav­i­ga­tion solu­tion soft­ware coach­ing and edu­ca­tion sys­tem is that tool and it is worth every penny you pay for it.