weather icon Clear
RJ App
Vegas News, Alerts, ePaper

Trimming the Escrow


Our lender has sent us a note – a good one, surprisingly! They say our escrow account is too big, so they’re reducing our monthly mortgage payment plus they sent us a check for $165. How is this possible?


If you purchased with less than 20 percent down you are required to put money into an “escrow” or trust account maintained by the lender. Part of your monthly payment goes to the escrow account, and that money is used to cover your property taxes and mortgage insurance costs.

Escrow payments are adjusted annually, and generally a lender can maintain an account with a balance that equals as much as 14 monthly payments at some point during the year. Because property taxes and insurance costs have gone down in most markets as a result of declining home values, it follows that the lender should be collecting less for escrow. In this case the lender made an adjustment and sent a check for the overage, steps that were both proper and appropriate.

Two points on this, though:

First, imagine that property values in your market once again rise. You should then expect property taxes and insurance costs to increase, and as a result you will receive a letter from your lender requiring either higher monthly payments for the coming year or a lump-sum payment to cover the new cost.

Second, the money held in borrower escrow accounts produces no interest for homeowners. If you buy with less than 20 percent down you may want to consider directly paying your property taxes and insurance. This sounds attractive in theory, but you’re likely better off with monthly payments to the lender despite the lack of interest. Why? Property taxes and insurance bills together can easily total thousands of dollars. Unpaid property taxes can lead to foreclosure even if you are current on the mortgage – and unpaid insurance bills are a violation of the mortgage agreement and potentially another cause of foreclosure.

Don't miss the big stories. Like us on Facebook.
Police: Oregon torture suspect with ties to Nevada using dating apps

Authorities say a man accused of torturing a woman he held captive in Oregon and who was convicted in Nevada in a similar case is using dating apps to find people who can help him avoid the police.

Protests begin after brutal beating by Memphis police shown on video

The recordings shows police savagely beating the 29-year-old FedEx worker for three minutes while screaming profanities. The Nichols family legal team has likened the assault to the infamous 1991 police beating of Los Angeles motorist Rodney King.