Last week, my real estate tax bill showed up. The county so kindly lets us pay it in two parts – half in September, half in December. Right now, the bill is clipped to the fridge, front and center, so there is no way I will forget to pay it in September. I could pay it now, but why give them my money before I have to?
For a lot of people, this bill isn’t something they have to think about because their real estate taxes are lumped into their mortgage payment. Because my credit scores were high enough, I didn’t have to choose this option when I bought my house. Instead, I choose to self-escrow.
What do I mean by self-escrow? Well, if I were paying my taxes as part of my mortgage payment, the mortgage company would be holding those funds in escrow until the bill came. Then they would use those accumulated funds to pay the tax bill.
Instead of paying that money to the mortgage company, I set aside approximately 1/12th of my tax bill every month. Then, when the bill comes, I have the money already allocated to pay it and don’t have to worry about where I’m going to come up with the funds. (I’m lucky – my house is still taxed at the rate it was at before it was flipped. I’m pretty sure once things are reassessed, I will be paying a much larger chunk.)
This works for me because I keep a solid budget. I know I’m not going to accidentally spend the money for the tax bill. I don’t actually pay attention to the total amount of money in my bank account – instead I focus on what’s in my budget categories, because that’s the money available to spend. But I know this method won’t work for everyone.
What do I gain by doing it myself? Control, I suppose. The tiny bit of added interest that I get from keeping that money in my bank account. And the peace of mind knowing that I don’t have to worry about the mortgage company forgetting to pay the bill.