Ref. Real estate closing-

Question

Ref. Real estate closing--Escrow or not,,whats the benefits?

Answer 1

Escrow is money that sits and goes to pay for things like taxes and insurance. Some mortgage companies reqiure you do an escrow to ensure these things are being paid. If your company does not require one I would still recommend it because it is tied into your monthly payments and they take care of paying it So you never have a lapse in payment for homeowners insurance, or paying your taxes. Also, since you pay it on a monthly basis you never have to come up with that large lumpsum to pay at different times during the year. For example property taxes are due every Nov. so instead of you coming up with that money on the spot it's been buildling all year long in an account for you. Same with insurance the whole lump has to be paid at the time the policy is started/renewed which it will renew every year the the date you bought the house so whenver you close it starts and 12 months from then you have to pay the whole policy again. So an escrow keeps you from worring about that hassle. The bank though does draw interest on it, but not very much.

On the other hand if you have a lot of money and twice a year you don't mind writing these big checks then you can just not do an escrow and let it build you interest, but for many it is hard to remember to save it every month so an escrow forces them to pay it and it's money they never see, but bills they never see either...

It really depends on what kind of person you are and if you are disciplined enough to save the money.