May mortgage update and would you prepay or increase your monthly payments when the escrow increases?

Last month (April):
Years left: 0.91666666667
P =$1,161.61, I =$52.79, Escrow =$809.48

This month (May):
Years left: 0.833333333
P =$1,166.21, I =$48.19, Escrow =$812.79

Amount saved from prepayment:  $0

Our escrow went up as it does almost every year.  When this happens, Wells Fargo gives us the option to pay the difference upfront to keep our payments the same or smaller.

Used to be when this happened I’d pay the difference so I could prepay more each month when I rounded the number up to a round number when writing the checks.  Also I like paying stuff early so I don’t have to worry about it later when I might have less money than I was expecting.

But we’re not currently doing any prepayment (since Paradise is expensive and I’m at half pay), not even the little rounding up prepayments that we did when we were just starting the mortgage.  It bothers my OCD a little bit not to write a round number on the check, but I’m getting used to it.

And because we’re spending more money than we’re taking in (not counting retirement savings) and because we have less than a year on the mortgage and there’s not even a full year left for the escrow, I decided to let them increase our monthly payment for the second time this year.

(Note also that that $812 or more will be the minimum average monthly cost of home ownership once we’re done with the mortgage not including utilities or repairs– home ownership isn’t free!)

Would you prefer to pay increases upfront or to amortize payment increases?

6 Responses to “May mortgage update and would you prepay or increase your monthly payments when the escrow increases?”

  1. gasstationwithoutpumps Says:

    I’ve never had escrow to pay—I pay my homeowners’ insurance and property taxes directly, not through an escrow account. In 30 years, I’ve only once paid a penalty for paying my property taxes late—an escrow account is intended to avoid that outcome (and, from the lender’s perspective, the even worse outcome of complete failure to pay taxes).

    I was not required to set up an escrow account, because my first mortgage was privately held by the person who sold me the house, and for the mortgage on the second house I bought, I had enough equity from the sale of the first house that the lender did not require escrow.

    In general, I prepay as much as possible, to avoid debt. Current interest rates are very low, but my mortgages were at much higher rates (the first one was at 14%), so prepayment was essential to reducing cost. Now my only debt is a tiny amount on my household credit card, paid off in full each month (I generally use debit cards rather than credit cards for routine purchases). So in this particular example, I’d prepay if possible—I’d even forego adding to retirement savings to pay off the remaining mortgage and be done with it.

  2. chacha1 Says:

    My preference would probably be to pay upfront and get it out of the way/off my mental burners. That’s what I prefer to do with my grossly overpriced auto insurance. But who knows how I will behave when we actually have home ownership costs to juggle. :-)

  3. Contingent Cassandra Says:

    So far, I’ve just let it adjust (but my mortgage is on autopay, and I’m not prepaying, though I may start at some point). Also, my escrow is taxes only; I pay the insurance (also on auto-pay) directly (this may be because I’m in a coop, which means I don’t technically own my unit, just shares that entitle me to a proprietary lease. I do have insurance that covers both the contents and the fixtures and improvements I’d have to replace in case of disaster, as well as some liability — basically the same kind o insurance a condo owner would have — insurance on the actual building is covered as part of my co-op fee).

  4. Debbie M Says:

    When I had a mortgage, I *always* let them adjust my payments. There was no discount for pre-paying–it just gave them the money longer to make money with.

  5. Rosa Says:

    our mortgage processor routinely says they’re raising our payment because the escrow rose, and then does it for one month and puts it back. It’s happened like 3 times. So I would ignore it and let the little rise come out of our habitual overpayment. I’m not sure that’s generalizable to other people’s processors though.

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