When I make my mortgage payment each month, part of the payment is for my escrow account. An escrow account is an account you pay into each month along with your mortgage payment to handle payments for property taxes and insurance. You earn no interest on this money but I'm sure the bank makes a little money off of it. The bank usually reviews the escrow account once a year to determine if they are taking too much money or not taking enough.
I logged into my mortgage account today to make sure all of my taxes had been paid for 2007 and realized my escrow balance is alot higher than it should be. The balance of the account right now is $1114.00!!! I currently pay $289/month into my escrow account which is equal to $3468 after 12 months. Last year, my property taxes were $2354.
What if I handled my own escrow account??
- I would make about $71 in interest. Depositing $217 a month into a savings account paying 5.05% (E*Trade) would yield $2675. ($2604 in contributions and $71 interest)
- I would have an additional $72 each month to add to my freedom accounts or towards my car loan.
- By handling my own escrow account, I would have an additional $935.00 a year to save or invest. ($72/month savings and $71 interest)