Asked by Martha  |  Submitted January 15, 2014

This broker says he can get me a lower interest rate on my mortgage if I pay the taxes each month along with the mortgage to a bank. Is this for real or a scam?

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  Answers  |  7

January 16, 2014

Hi Martha,

Forgive me for answering this question twice, but I want to make sure you have what you need to make a decision. Typically, lenders require that you escrow taxes and insurance though that's not always the case. When taking out a loan, most borrowers will create an escrow account where the taxes and insurance are paid along with the mortgage payment. I don't know of any banks that give you a lower interest rate for doing that. If so, it would be a minor amount at best, possibly one eighth of a percentage point. Can you provide any more details so I can give you a more complete answer?

Thanks,
Brian Howell
The Mortgage Network

$commenter.renderDisplayableName() | 05.29.17 @ 04:20

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September 18, 2014

Yes, many banks will SLIGHTLY reduce the interest rate on a loan if you set up an escrow account with them for taxes and insurance. Good luck!

$commenter.renderDisplayableName() | 05.29.17 @ 04:20

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March 28, 2015

Fannie Mae/Freddie Mac have a surcharge of .25% (in most states) of the loan size as an added cost for borrowers who choose not to escrow. The cost is slightly less in some states. It's typically not enough to change your actual RATE, it's more of an adjustment on the costs of the loan. .25% of a 100K loan is $250. Whether it's worth the extra money to not escrow is a personal decision, but it's important to remember, you've got to pay the taxes/insurance whether you're escrowing or not!

Ted Rood, Mortgage BrokerPRO+ in Maryland Heights, MO | 08.21.15 @ 04:05

Also note that the surcharge for waiving escrows does not apply in California, borrowers there with 20%+ equity can pay their own taxes/insurance without incurring any additional costs on their loans,

$commenter.renderDisplayableName() | 05.29.17 @ 04:20

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September 08, 2015

This doesn't seem like that tough of a question. Escrow accounts for conventional loans for borrowers with 20%+ equity are optional. In most states, a borrower choosing NOT to escrow will have a pricing adjustment to his loan of .25% (or $250 on a $100,000 loan).

$commenter.renderDisplayableName() | 05.29.17 @ 04:20

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November 17, 2015

For real, most lenders will charge a .25% " waive reserves " fee if you choose to pay you own taxes and insurance

$commenter.renderDisplayableName() | 05.29.17 @ 04:20

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November 18, 2015

In California - there is no pricing add for choosing to not have impounds for Tax or insurance. Frankly the difference is nominal. If you are a good saver it is better to review bills annually and pay yourself

$commenter.renderDisplayableName() | 05.29.17 @ 04:20

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April 24, 2017

Most lenders will offer a better rate/ fee if you have a tax & insurance impound account set up on a new loan the normal fee that is charged for "waiving impounds" is .25% in loan fee

$commenter.renderDisplayableName() | 05.29.17 @ 04:20

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