Jul 24 2012

Funding our escrow upfront will save us $277+

We’re in the process of refinancing our house to a 15-year loan at 2.875%.

We’ll need a deposit amount to set up our new escrow account, and the amount I’m told we’ll need is $1,193. That money will be refunded to me from my current lender, supposedly within 30 days.

My lender gave me the option to roll that balance into my new mortgage, or bring a check for that amount.

If I added $1,193 to my loan, amortized for 15 years I’d pay $277 in interest! Also, my monthly payment would increase by $8, or $96 per year.

Good grief. We’ll write a check from our savings account to cover the escrow, and we’ll be refunded hopefully within a month. This move will save us a lot of money for just a brief inconvenience. I mean really — you can have that $1,193 for 30 days if it means I avoid paying on that amount for 15 years.

Our appraisal is coming up. Hopefully our house is worth what we paid, or we might have to come up with some extra cash to make sure we still have 20% equity.

Our closing costs:

  • $251 for appraisal, credit report, flood certification, title insurance
  • $70 local filing fee. Pfft.
  • $325 to re-file for our Mortgage Credit Certificate, which we will pay with glee because the MCC will save us $6,100+ over the 15-year term on our federal taxes
  • $1,193 for escrow account as mentioned above

6 Responses to “Funding our escrow upfront will save us $277+”

  1. So the grand total for your refi so far is about $650 (in addition to the $1200 that will be refunded). Are you expecting any other costs? Good luck on the appraisal! I hope your house is worth an extra $50,000! :)

  2. Yep, that’s it. The amount could change if the closing date moves. We’d have to pay $10 or so per day in interest so if we close really close to the first of the month then that charge would go away.

  3. Did you look into not having an escrow account? It’s for the mortgage company to pay your real estate taxes and home owner’s insurance out of, right? If you don’t have to pay PMI, you should be able to avoid this account.
    We don’t have an escrow account, so we pay the insurance company and the appropriate muncipalities accordingly. Our township offers a 2% discount for paying our taxes a month early, so we save 2%, plus whatever money we earn in interest by holding tax money in our accounts instead of in an escrow account.

  4. Oh no I didn’t look into that option. That would be nice to just escrow it myself! I could earn .8% interest on it rather than nothing at all, and ooh if I get a discount even better. Thank you!

  5. We were able to bundle the escrow amount into our refinance, then “pay it back” a month later when we were refunded escrow from the first loan. We treated it like any prepayment and tacked that amount onto our monthly payment. Because your interest is re-amortized each month we figured it wasn’t a whole lot of interest – plus it saved us from writing a $3,000 check during a tricky time. I hope that made sense?

  6. This is one of the reasons I’m so glad I was able to opt out of the escrow account – I have my own way of tracking that money and then if I ever refinance, I don’t have to deal with the amount in the escrow account. Plus, this way, paying the property taxes is a habit by the time I’ve paid off the mortgage in < 5 years.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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