To Escrow or not to Escrow

If you are reading this because you aren't sure.....escrow.

When asked if you'd like to escrow your taxes and insurance, you are being asked if you would like to pay your property taxes and home owners insurance monthly with your mortgage payment (which consists of principle and interest for your home loan).

Typically, your taxes and insurance are due every 6 months (at least mine are). I would rather know that the money is going to be in an account waiting for the bill to come and get paid without me having to put forth any effort (I like my finances to be automatic: direct deposit, 10% to my 401k, money pulled from my checking to my savings monthly, dividends re-invested into my portfolio, mortgage payments pulled from my checking, auto-pays on bills, etc). I watch my money like a hawk via www.mint.com, but everything is automatic.

If your mortgage principle and interest payment are $1,300, your property taxes are $3,000 annually, and home owners insurance is $1200 annually, then your total monthly PITI (principle, interest, taxes, insurance) payment will be $1,650 because your taxes and insurance will be divided into monthly payments and added to your mortgage. When the bills are due, the mortgage company will pay them.

If you decide not to escrow, understand that you will receive some hefty bills during the year that you may not be fully prepared for. My parents don't escrow because they want to make interest on their money instead of allowing the mortgage company to. I, however, don't mind missing out on that interest and consider it a cost of making my life easier.

Also, often times you can get a little discount on the fees for your mortgage because the bank feels safer knowing that the taxes and insurance are being paid on-time.

Your call though.