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by Buying a home isn't easy. There a giant stack of paperwork (each requiring initialing, it seems), many thousands of your dollars on the line, and all discussion is done using a lingo seemingly special to the mortgage industry. In order for the borrower to stay on top, he or she must be informed.
If you're thinking of buying a home, or are in the process somewhere, consider this article an essential part of your inform-myself-so-I-don't-get-taken-to-the-cleaners activities. It explains how to economically compare a discounted mortgage interest rate to the ability to not escrow your taxes and insurance - the proper determination of which could save you thousands of dollars.
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Very Good Article by TheGainsayer :: NR4 :: on 06 September 2007
I thought this was extremely well thought-out and executed, good job B.
While it is very numbers-driven, also consider the unstated value of the following intangibles, some of which were lightly addressed in the article.
1. What doesn't figure into play here is the value of time/money for
multiple house owners, which is a bit of an abstract thing, of course, but still worth consideration.
2. It also does not figure into play the protection that the mortgage
company gets for escrowing the taxes. Tax liens are superior to any and all liens and may be sold at auction in many states including Texas. Look at escrowing like a very inexpensive insurance policy against foreclosure for failure to pay taxes.
RE: Very Good Article by Brandon :: NR9 :: on 06 September 2007
I'm not sure what you mean by multiple house owners. Do they pay higher taxes?
On the second point, I can understand there is peace of mind in not having to worry about paying taxes at the end of the year if you are forced to pay them with each mortgage payment. You take a hit in the pocketbook, though, and I think I would always advise taking the earn-interest road.
You also mention mortgage company protection and tax liens, but you'll have to explain more. I'm not familiar with how those work or how they come into play here.
RE: Very Good Article by TheGainsayer :: NR4 :: on 06 September 2007
No, taxes aren't different for multi-house owners per se. It's just the added cushion you get from having the benefit of one (which is all your article focuses on) multiplied across several investments. It's not a counter-point, rather a support for what you're saying.
Here's the deal with tax liens. Let's say you don't escrow your taxes, but are paying your mortgage. You can probably go three, maybe four years before the county notices and starts taking some action. Even if the amount of taxes you have delinquent is some absurdley small amount, like $1,000 or something, the county's lien on your proparty supercedes the mortgage company's. In the state of Texas, for example, the property must then go to an auction, and the winning bidder takes the property. The mortgage company must send some representative to that auction if they want to protect their investment, just like anyone else. That is what is meant by tax liens being superior to all other liens (including in this case, the mortgage company's). Therefore, you can see that escrowing the taxes is not only a safety for us as individuals, but the mortgage company as well.