I prefer to pay my own property taxes, because of the problems my parents had when I was kid with their bank. This how I “self” escrow property taxes so can save money with each paycheck
Most people escrow property taxes through their mortgage payments. About 30 years ago my parents had trouble with their mortgage bank miscalculating the escrow account requirements by at least $1,000 a month. It took months to figure out and I really don’t want to think what $1,000+ is now worth after inflation.
So I’ve always been against someone else paying my bills. If they screw up I’m on the hook to find the cash to pay the bill and then sort it out with the intermediary. Pointing fingers at the intermediary wouldn’t fix the immediate problem. No thanks, I’ll choose a different headache thank you.
When I bought my first house it was an easier conversation to waive escrow, but that was 2007 before the market meltdown. I sold that house in 2010 and moved to the coast. I’ll spare you the headaches I had in getting the new mortgage BUT waiving escrow ended up being a little more annoying this time due to paperwork errors.
I caught the error when I saw the final paperwork. It sounded like there wasn’t enough time to fix it before closing. The banker swore I would be able to call and get it fixed after closing because by putting down 20% I qualified to waive. The whole loan process for this house was such a headache that I honestly wasn’t convinced I would be able to fix it. Fortunately as part of fixing a different paperwork issue, the escrow waiver was fixed with a few minutes to spare.
Fast forward a month after closing. I got a nastygram in the mail from the bank that they were notified by the City that I was late paying my property taxes. The bank paid the overdue taxes, opened an escrow account, and required that I immediately reiumburse them for the money they paid to the City.
Just what I wanted at that particular moment, sorting out a crisis when my world was already crazy.
Honestly to this day I never got a straight answer from the bank about what happened.
I called the City. Nope, they didn’t know who I was because all the paperwork hadn’t been processed yet. The dates the bank said that the City tried contacting me about the late taxes were BEFORE I even closed on the property. The builder (aka previous owner of the house) was fully up-to-date on the property tax bills. Everything was correctly settled at closing. The next quarterly payment was due a few weeks in the future. And the City couldn’t find a match to any past bills for the dollar amount that the bank claimed was late.
After a few rounds of contacting the bank to try and get answers, I gave up. Somebody goofed on their side and they weren’t fessing up. I paid the money to cover the “escrow” payment and the bank closed the escrow account so I was back to my original plan of paying my own taxes (and homeowner’s insurance).
How I prepare to pay my quarterly property taxes without the stress
Paying your own taxes, especially depending on the amount due per quarter can be a big additional bill. To help manage that stress without scrambling each quarter I essentially created my own escrow account. This allows me to receive a few additional dollars of interest per year too.
I opened a separate high-yield savings account specifically to keep the money for my property tax payments so that I don’t accidentally spend it.
I figured out my annual taxes and divided by 26 so that I know how much to put away per check. That money is off-limits for any other use.
Tip: Don’t forget to adjust each year for tax changes otherwise you may need to come up with extra dollars per quarter.
I prefer this approach because I prefer to control my own money. I know other people who prefer to pay one bill and let the bank sort it out. To each his own of course.
What about you? Do you escrow? Ever had any problems?