When purchasing a home, there will be many questions to consider – especially when it comes to your payment options. One of those will be whether or not you should set up an escrow account, or take on the responsibility yourself for paying your homeowners insurance. The simple answer to this questions is – it depends.
There are actually several questions that you should ask yourself – and honestly answer – before moving forward with your decision. And, in some cases, you may have the question answered for you. For example, Federal Housing Administration (FHA) mortgages require that an escrow account be established. However, in other instances, you will typically have the option of paying the insurance yourself – especially if you have a down payment of at least 20%.
Some of the key questions to consider should include the following:
- Are you a good saver? One of the biggest keys is whether or not you are a good saver. This is because if you are not, you may find yourself scrounging for the money that you need when the homeowners insurance bill comes due each year. In that case, it may be best to just simply have it included as a part of your monthly mortgage payment.
- Will it make a difference with the lender? In some cases, having the payment escrowed could provide you with a lower overall interest rate – depending on the bank or lender that you are going through to obtain your home mortgage.
- Can you earn some money while you wait? While interest rates are fairly low today on bank savings accounts, you may be able to find somewhere to stash your funds while you wait for your homeowners insurance premium to come due, while at the same time earning a small amount of additional cash on the side.
Depending on your answers to these questions – as well as on how much more, or less, convenient it may be to have your homeowners insurance premium taken out of your mortgage payment – it will help you come up with the best scenario for you.
Need help finding the perfect Orlando home? Give me a call. I’ve been matching up buyers with their dream homes in Orlando and the surrounding area for more than 20 years.