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PITI - Can I Drop Escrow from My Home Loan?
Dear Edith: You discussed escrow in a recent column, but you didn't say whether I could talk my bank into letting me get out of it. Do you have any advice? -- P. I.
Answer: If you were to not keep up with your fire insurance premiums and the building burned down, you'd be left with just the value of the lot. If you were to not pay your property taxes, the real estate might be seized and auctioned off for back taxes. Either way, your mortgage lender could be left with little or nothing as security for an unpaid mortgage loan. That's why your lender wants to be sure insurance premiums and taxes are paid, and paid on time.
Many, or perhaps most, mortgage plans let your lender collect payment month by month. You send in one check to cover PITI, which stands for principal (something toward reducing the debt), interest (the past month's interest on the remaining debt) and 1/12 of your property tax and homeowners insurance costs. Your lender will accumulate the extra money, eventually receiving your tax bills and insurance bills and paying them for you.
In the meantime, the money is in limbo. It belongs to you but you can't touch it. The lender is just holding it in escrow. You should receive regular accounting and in some states, interest while the money is being held.
Your existing mortgage plan evidently requires monthly escrow payments, sometimes called reserves. You probably have a Federal Housing Administration or Veterans Affairs loan, or a conventional mortgage that didn't require a big down payment. Your debt may have been gathered into a package with similar ones and sold to investors on what is known as the secondary market. You can always read the fine print in your mortgage document to see whether there are any circumstances under which you could stop paying escrow and take over your own bills, but I don't think you'll have much luck.
This next reader has a mortgage that doesn't require monthly collection of escrow funds. He probably investigated the matter before choosing his mortgage plan, and he may have presented an impressive credit rating.
Ms. Lank: For me, one advantage of getting out of escrow accounts is that I can pay my homeowners insurance and property taxes by credit card. I gain airline mileage points by using the credit card versus paying by check or an escrow account, and that adds several thousand miles each year. -- S.
Answer: OK, but here's a twist: Occasionally, homeowners in some states find that interest rates on escrow accounts were set by law years ago when rates were higher, and it's more interest than they could currently get on savings accounts.
Edith: You suggested that people put an ad in the newspaper to sell their timeshare. This is outdated advice. If people are interested in selling or giving away their timeshare, they should join The Timeshare Users Group, or TUG, for a cost of $15 per year for free classified advertising. There is a classified Bargain Basement section. Spending $15 per year to reach a worldwide audience is far better and cheaper than putting an ad in a local paper. TUG has a very active group of users and may have additional suggestions for timeshare owners. It has been quoted in national magazines as an authority for timeshares. -- askedith.com
Answer: If my newspaper advice is outdated, it's because I am, too. Here's how far back I go: On June 6, 1944, I was already a full-time reporter. I was sent out to cover my town's reaction to the long-awaited D-Day, the American invasion of Western Europe (It was a sunny day; all the church doors were wide open, and people were sitting inside, motionless and silent.)
I still think a classified ad in an old-fashioned newspaper might catch the eye of a tourist passing through a resort town where an unwanted timeshare is located. And there are still older folks who don't research the internet.
At any rate, I was pretty sure someone would respond with information about your group. Thanks for writing.
Dear Edith: I am buying a house on a land contract. It's been six years, and there are nine to go. The man I'm buying it from is in hospice. Where do I send my payments, and what happens if he dies? -- H. W.
Answer: Your contract would remain just as it is. Keep sending your normal payments to the same address until you are otherwise instructed. Give it a few months, and if you don't feel secure about the matter, then ask an attorney to investigate the person with whom you should be dealing.
Contact Edith Lank at www.askedith.com, at firstname.lastname@example.org or at 240 Hemingway Drive, Rochester NY 14620.
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