Monday, March 30, 2009

Roundabout mortgage payment with escrow money

Recently, I received my new mortgage payment coupon booklet that contained an analysis of my past year's escrow. This escrow is collected each month with my mortgage and is used to cover the yearly property tax bill and annual homeowner's insurance premium. There was a statement I read, but did not pay much attention to that said if the remaining money from the 2008 escrow account totaled more than $50, I would receive a refund check.

A couple weeks later, I received a check in the mail from the company that holds my mortgage for $60.11, the amount that was listed as remaining in my escrow account. Aside from being an annoying way to eliminate the excess money (and wasting paper and money to send to me), I had no qualms figuring out how to use the money: add it to my mortgage payment.

Why do I consider this an annoying answer to the solution of excess escrow funds? Why not have the mortgage company automatically add the money to my principle and just send me a statement? You see, I do not have immediate access to my credit union where I live and there is not a branch near my work. This means I have to take extra time and go to the bank to deposit the check. I really like electronic deposits and transfers to get my money to where I want without difficulty, and ATMs are ubiquitious enough I can easily find one to withdraw cash quickly. So an extra trip to my credit union to deposit the check so I can send the money back to the mortgage company seems quite silly. Efficiency at its best!

Still, I am grateful for paying more to my principle (I am only in the third year of a 30-year mortgage), and this was the best use of the money I consider part of my mortgage anyway. Since I used all my tax refund money for my Roth IRA, I was not able to give my mortgage a little boost earlier this year and am not willing to commit more money to such an illiquid account.


  1. Financial'd think they could be more efficient. I got a cheque for $4.50 last month from the Sensodyne people because I complained that their whitening toothpaste caused me sensitivity. I never cashed it because it would have cost me over $10 in gas to drive to the city and back to get to a bank machine! Next time I'm in the city I'll put it through the machine.

  2. @Rain,

    My mortgage company does everything by paper. Although I pay my mortgage electronically through my credit union, they send the company a check.

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  4. It's been years since your post, I hope that you are doing better in the financial department. I know that paying escrow along with your mortgage feels like a pain in the neck. But I've long learned that escrow can also come in handy in emergency situations that concerns your property. It will be helpful, especially if you don't have hazard insurance premium.