Why I Like Keeping My Mortgage Payments Separate From My Property Tax Payments

When you buy a home, you don't just sign up to pay a mortgage. You also have to cover additional costs related to your home, like insurance and property taxes.

Many homeowners pay extra money to their loan servicers every month on top of what their mortgage payments amount to. The extra money goes into an escrow account that those loan servicers can dip into to pay homeowners insurance and property tax expenses as they arise.

But I prefer to keep my mortgage payments separate from my property taxes. Here's why.

It's all about cash flow and control

For some people, making one payment every month is easier than having to pay a mortgage and also reserve funds for homeowners insurance and property taxes. That way, they don't have to be bothered when their property tax bill comes due, which often happens on a quarterly basis, or when their homeowners insurance comes due (which, often, is once a year).

But I don't like going the escrow route for a couple of reasons. First, I don't like the idea of having to pay more than what I owe on my mortgage each month, even though I know the extra money will be used to cover expenses I'm on the hook for.

Mortgage loan servicers are allowed to demand more money in your escrow account beyond the exact sum they need to cover your homeowners insurance and property tax costs. And the way I see it, why should they get to hang onto my money until they need it when instead, I could hang onto my money and just pay those extra expenses when they come due?

Another reason I like keeping my mortgage payments and property taxes separate is that taxes are high where I live, and they tend to increase frequently. Paying them separately allows me to better keep tabs on my taxes. And, it motivates me to pay closer attention to my tax assessments each year. That's important, because you can appeal property taxes if you feel your increase is unreasonable -- something I've done before and actually won.

A move that's not right for everyone

Because I'm someone who follows a tight budget and is very on top of my expenses, it makes sense for me to pay my property taxes with money in my checking or savings account rather than deal with sending my mortgage loan servicer extra money every month. But if you're someone without a large financial cushion, or someone who doesn't always tend to run such a tight ship when it comes to spending and budgeting, then you may want to go the escrow route.

Falling behind on property taxes could eventually put you at risk of losing your home. That's clearly not something you want. By paying your mortgage loan servicer extra money each month, you're basically guaranteeing that you'll be current on your property taxes (and your homeowners insurance). So in many cases, it's worth parting with some extra money each month to get that benefit.