First, I’m not a financial advisor, but feel like I simply must share a bit of information with homeowners out there. Maybe it’s because I think about folks feeling like they have so little control over their own money these days, or maybe it’s just my way of saying, “It’s your money, put it to work!” Having worked in the real estate industry for many years, I often saw people escrow their tax and insurance payments. Break this down for a moment: if you have an escrow account, you pay extra each month to have someone else send payments to your property taxing authority, plus, they send your payment for your homeowner’s insurance. In between, what is that money doing? It’s pooled with other people’s escrow accounts and earning amazing amounts of interest, but not for YOU. Instead, the managing entity has tons of these payments sitting in accounts, building interest for their company. It’s not illegal, it’s not even immoral, it’s just not working hard for you.
What I suggest for those that can manage it and if it’s permissible within your loan contract, get back your escrow, and instead of sending those subsequent payments to some managing entity (like your lender or title company), diligently put it in the savings account and make those property tax and homeowners insurance payments yourself when they’re due. It’s important to keep these funds separate from your every day funds, so you don’t inadvertently spend it. If you’re in a mortgage that requires mortgage insurance, you might not have this option at all, so you really do need to check with your lender to see if they’ll even allow this, but at least ask. If you’re a spend thrift or can’t save a nickel to save your life, this is not a suggestion for you – it’s too risky for people that don’t or can’t save well. For those that can, you might gain a couple dollars of interest over the year and feel a little more in control of your finances.