Last month (April):
P =$970.93, I =$243.47, Escrow = 613.58
This month (May):
P =$983.37, I =$231.03, Escrow =788.73
One month’s prepayment savings: $7.91
As with much of the country, housing prices in our little town are starting to recover. That means that property taxes are going up again. Yay. (Not really yay.)
Our mortgage provider tells us we have an escrow shortfall of $1260.93. If we send in an extra check for that amount, our monthly nut will only go up by $70.05. If we don’t, they’ll prorate for us and our monthly nut will go up $175.13.
So which should we do? Here’s my thought process.
Pro (cutting a check): Ugh, it’s just over a round number now, and if I prepay it’ll still be under a round number and my OCD will feel better.
Con: Why should they be getting interest on our money?
Pro: What interest? Besides, if I really feel that way, I should ask them to stop escrowing for us and just pay it myself.
Ok, let’s double check that they’re not charging us extra to prorate… doing the math, there’s a 3 cents difference between the two.
Con: Which is completely and totally negated by the cost of the stamp on the check, by an order of magnitude and then some.
Pro: This is a good way of hiding money so we’re not tempted to overspend. I’ve got too much in savings as it is, and this money is going to have to be spent sometime. Why not now instead of when a negative shock hits us?
Con: It’s only an additional $175.15/month. Even if DH loses his job tomorrow we’ll be fine, and it’s better that money stay in the emergency fund.
*end conversation with self
So… which of these arguments were most important to me? The one about the OCD and the one about the cost of the stamp. Funny how the irrational stuff is what’s important. Yes I have a PhD in economics. Don’t judge me. Irrational stuff matters when the decision isn’t really that important.
In the end, the cost of the stamp won out because I think we’ll either be significantly prepaying the mortgage for a while (meaning the fact that we’re $3 over a round number isn’t such a big deal since the checks will still be round numbers), the number will change again with the next escrow cycle, or DH will lose his job and we’ll re-amortize and get a completely different number.
Do you like to pre-pay escrow shortages? Or do you do your own escrow? Or have you decided to opt out of the whole mortgage thing entirely?