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.