Can I Pay My Own Taxes and Insurance?

Escrow accounts are a common aspect of mortgage terms and agreements. These accounts hold the funds that will be used to pay the taxes and insurance on a home.

Each month, the buyers pay a portion of these fees with their regular mortgage payment. The lender then holds these funds until the insurance or taxes are due and disburses the payments appropriately.

In many cases, these escrow arrangements are required by the lender as part of the terms of the mortgage.

But what if you want to pay your own taxes and insurance? You may or may not be able to do this. The answer depends on a couple of factors.

First is your loan type. FHA requires that you keep an escrow account. With conventional mortgages, you may have the option of paying your taxes and insurance on your own, but there are usually stipulations. The lender may add a premium to your interest rate, which your payment will reflect. They may also ask for a higher down payment or require a higher credit score for you to qualify for a loan without an escrow account.

Why are lenders so concerned with these payments?

In many cases, the taxing body (county, city, state, or other entity) has the right to take possession of your home if you get behind on your taxes. They may be able to do so even if you are current on your regular mortgage payments. This is the last thing you and your lender want.

Keeping insurance current is also important. If your coverage lapses and a disaster occurs, the lender may be left holding the note on a pile of rubble.

With these situations in mind, it’s easy to see why a lender wouldn’t be willing to take the risk of allowing buyers to control their tax and insurance payments.

Still, lenders allow buyers to do so in some situations. Each lender has guidelines on what they will accept.

Contact our office to review the escrow and tax payment options available to you.

When Should You Refinance Your Home?

Mortgage interest rates are at near-record lows. If you think you may want to refinance your home, now is a good time to at least look at your options.

You might want to refinance for one of several reasons. The first is to lower your monthly housing payment. The second could be to pull cash out of your home. Last, you may want to change the type of mortgage you have.

Moving from an FHA loan to a conventional loan could lower or eliminate your mortgage insurance premium, thereby saving you money each month. You may also want to consider switching from a 30-year mortgage to a 15-year term. With this option, your monthly payment could actually increase, but looking at the big picture, your interest savings over the life of the loan could make the move worth it.

The HARP program, which allowed refinance transactions for borrowers with little or no equity, ended at the end of 2018. However, you still have options. The good news is that both Fannie Mae and Freddie Mac have programs that can address some of the concerns that HARP loans addressed.

Another important point to keep in mind is that, unlike with purchase transactions, you can finance your closing costs in the course of a refinance transaction.

Do these options sound appealing? Are you wondering whether your home’s value would qualify your mortgage for a refinance?

Contact our office with any questions. We can discuss your options to see whether you could start saving money by refinancing your home.