A silly question about taxes

So, I met with Wendi Lindsey (LIF Vendor who is amazing!) and signed contract today, yay!!

Anyway, I forgot to ask this tax question, and it's not an issue, but I am just curious.

If I close in July, they want the taxes for July - Nov, upfront.

I know this is standard, but my question is: why do they do this?

I can see paying taxes for July & August, but in Sept, when the first mortgage is due, why can't I just pay the taxes then?

I figure they do this to be sure you have the tax money, but wouldn't it be implied with the loan that you will definitely have it?


Also, how easy is it to get rid of the escrow account after you're all settled in? I really don't want to keep having this account and paying things from it, you know?

I just feel like escrow makes me feel like a little kid with a savings account that my parents set up or something, and it's to make sure I'm responsible.

Sorry if any of these questions sound silly, just trying to learn here. =)

Re: A silly question about taxes

for the tax question, I think you just get screwed with having to put it up front, considering you still have to pay monthly.

As much as we pay the taxes monthly, with our mortgages-- most towns want the money quarterly-- so you need to pay all that money up front because you pay in advance, and depending on time you close, you may have more than one quarter to pay for, i.e. a full quarter and a portion of another.

You also have to bring to closing money to reimburse the seller for any taxes they have paid upfront for taxes, but you will then have ownership of the property. For example Q2 is April, May, June. If you close June 15th, then you owe them 15 days worth of taxes.

No clue about the escrow account-- that confuses me!

Re: A silly question about taxes

The bank wants a certain amount of taxes held in escrow (usually 6 mos) so that if something happens and you stop paying the mortgage the taxes are paid for another 6mons and that way the county won't come and foreclose on the property for unpaid taxes.

It is part of your mortgage agreement you will always have that.

As far as any other monies held in escrow for repairs and such that gets settled out quickly and thats the end of that escrow acct.

Re: A silly question about taxes

if you don't want an escrow account set up, speak with your bank and tell them you want to pay your taxes and homeowners insurance out of pocket.
You DO NOT have to have an escrow account. You just have to make sure you have that money when it comes due.

Message edited 5/26/2010 8:35:28 AM.

Re: A silly question about taxes

I used wendi as well... she really knows her stuff and knit picks the contract to get you in the best position... so wonderful!

But I just have to say that Im glad that the tax $ is in escrow.... Yes, I suppose it feels like being a kid again and having to put money into a piggy bank, but im grateful for that bc we'd somehow just end up spending it and coming up short... I dont even have to think about paying yet another bill... its already done for me!