Sunday, October 14, 2012

Mortgage Impound Accounts - Q&A

Mortgage Impound Accounts - Q&A

I recently got a question from my buyers Alison & Matt who are the process of getting their first home in Atascadero.  She asked me:

Hi Traci!!  I had a quick question for you.  So I've been talking to a few people and we are questioning whether we really want to build our property taxes into our monthly mortgage payment.  I'm wondering if it's better for us to just budget that amount and move it into our savings (which earns interest) and just deal with paying it twice a year (I don't remember what it was).  I guess I would be more concerned about paying it if we didn't have a lot in savings.  My thought's are that it would make our monthly payment a lot more manageable and we could earn a little interest on the money as opposed to paying it with our mortgage. What do you think?    - Thanks!  Alison

My advice to Alison is if your lender is giving you the option to add it to your mortgage payment or not, do what you feel most comfortable doing. Some lenders don't always give you this option especially if you are putting  less than 20% as your down payment.  Adding your property taxes to your mortgage payment is called a Mortgage Impound Account.

Alison is right, she can save the money and build a small amount of interest on the money before she makes her payment. That interest is taxable money, so some may argue it's not worth the hassle of saving in a separate account accruing interest because you're taxed on it anyways.

By having an impound account many people enjoy the peace of mind knowing there is one less bill to worry about and that it's paid automatically. That's the no hassle situation.

Choose what makes the most sense for your situation, is my advice to Alison and to you.

Let me know if you have any questions about anything real estate related. I'm here to help!

"A Realtor that knows homes."

Traci Ferguson

License #01875751, ecoBroker #16082