Home Buying in Boise>Question Details

Gracy, Home Buyer in Mesa, ID

Can I pay the Property Taxes and Home Owners insurance seperately or do they HAVE to be included in the monthly mortgage payments?

Asked by Gracy, Mesa, ID Mon Sep 9, 2013

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That is a great question. If you did not get the answer to your satisfaction, let me know how I can help. John Burke did have a good answer.
0 votes Thank Flag Link Wed Oct 16, 2013
You can, but lenders usually charge you a higher interest rate if you do so. Why the higher interest rate? Because the banks show the money in impound accounts (your money) as an asset on their books, allowing them to loan money to other home buyers against it. Check out local or regional banks or credit unions that don't sell their mortgages (hold their own paper).
I pay my taxes & insurance separately and my insurance company sends the renewed policy to my lender every year. Stay Free!!
0 votes Thank Flag Link Tue Sep 10, 2013
Consult your lender to see if this option is available to you. I have seen this done however it is not recommended it takes a very disciplined person to come up with the lump sum due at tax time. It has always been recommended to have taxes and insurance included in your payment.

Please contact me with your Real Estate needs. I can always be reached on my cell/text 208-602-5157.
0 votes Thank Flag Link Mon Sep 9, 2013
It depends on the bank. However, the norm is that banks require reserves for the property taxes and prepaid annual home owner's insurance. This is not a definitive answer. It may vary from bank to bank.

The simple answer why mortgagees require this is because they have interest invested in the property.
As some of the professionals here mentioned, lapse or expired home owner's insurance means no insurance coverage on the collateral -which is the property.

Unpaid property taxes may result to lien on the property. Property Tax Liens are in the first position.

I hope this helps.

Best.
0 votes Thank Flag Link Mon Sep 9, 2013
Gracy,,

usually if you have 20 percent or more down the lender will allow you to pay your taxes and insurance outside of the escrow each month so that your principal and interest would be the only amount that you have to pay each month. If you would like to speak to a lender, to find out the specifics for your qualifications, call Jane Hopkins at 208-947-1127.
0 votes Thank Flag Link Mon Sep 9, 2013
Hi Gracy:

Depending on how much your downpayment is and what type of loan program you are going with, some lenders will allow you to pay your real estate tax and home owners insurance on your own. Generally if you put down 20% you can pay on your own; some lenders will allow you to put less down and still pay on your own.

If you are purchasing in Illinois, please call or email me for more information. You can also visit my website to complete an application.

I look forward to helping you!

Best regards,

Patty Harrison
Smart Mortgage Centers
Web Reference: http://www.smartmortgageinc.com
0 votes Thank Flag Link Mon Sep 9, 2013
As far as my experience has been, all lenders require a reserve account for payment of property taxes and home owners insurance. If you want to know your lenders policy, you will need to ask them that question. By collecting 1/12 of the total each month, they are assured that when the taxes and insurance are due, those are being paid and that there cannot be a problem.

I am of the opinion that it doesn't hurt to ask. You will get a yes or no answer.
0 votes Thank Flag Link Mon Sep 9, 2013
Since your mortgage company is protecting the asset that they are securing, they do not like to let owners handle these on their own. If an owner let their homeowner's insurance lapse and the house burned down, the lender would no longer have an asset protecting their investment. Likewise, unpaid taxes can result in tax liens and eventually a tax sale if taxes go unpaid long enough, another situation that puts the lenders asset at risk.

I have known clients who, after paying their mortgage down to a low loan-to-value, have been able to take over paying taxes and insurance themselves. But for most people with 20% or less down, this won't be an option. When you include these expenses with the monthly mortgage payment, the lender is 100% certain that these critical items are paid on time and in full.
0 votes Thank Flag Link Mon Sep 9, 2013
The bank will tell you how they want you to pay the taxes. It usually depends on the type of financing you have and a few other factors. Home owners insurance is usually paid in one shot, proof is needed in order to get clearance to close.

Chris
0 votes Thank Flag Link Mon Sep 9, 2013
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