With our new house, since we’re planning on putting down 20%, we were given the choice to escrow our taxes and insurance or not.  I didn’t realize this was even an option – we’ve *always* escrowed.  Of course, this is the first time we’re putting a full 20% down on a house.  There are advantages and disadvantages to each option, but I think we’re leaning towards not escrowing because we know we have the discipline and would like the interest.

To Escrow

Escrowing is “easy” – we don’t have to worry about paying our property taxes each year – the mortgage company takes care of it.  If we were bad at budgeting, escrow would be a good thing.  However, we’re pretty good at budgeting for long term expenses (we do it for our vehicle property taxes as well as car and life insurance).  If we don’t escrow, we’ll have to save up for the first payment – which is in April for my mom (same county, different school district).  Now, our home should be assessed as unimproved land for that first April payment, but then we’ll need to pay the full amount once they figure that out.   That’s potentially having to save 8k in one month for taxes.

To Not Escrow

One of my pet peeves about escrow is the analysis that they do each year and it alternates between sending us a check for a few hundred dollars and us owing a few hundred dollars per year.  I wish they’d just assume that the taxes will be higher (because they probably will be!), and charge the difference – instead they send us a check, and are “surprised” when we owe money the following year.

If we save our money ourselves, we’re looking at earning interest on about 9k/year – not much right now, but possibly more in the future.  And we want to pay the mortgage off in about 10 years, so we’d be paying the taxes and insurance ourselves anyway at that point – might as well get used to paying it ourselves now.

Have you had the choice to escrow or not?  What did you choose and why?