I think there’s some confusion here over homeowners insurance vs. mortgage insurance, which are two separate things.
The latter is almost always included in the mortgage payment and sticks around for the life of the loan. A homeowners insurance policy is for damage to the home itself and generally unrelated to the mortgage.
Well, here the seller arranges with the bank to be ready to accept the payout,
and the buyer makes out cheques to pay the seller’s mortgage , perhaps some cheques to pay other debts the seller has, and the one cheque to the seller for the cash he gets . These cheques are traded for the title deed and correct forms and the party shows any requisite paperwork stuff is complete, paid for , in place… (tax,insurance,etc) to approve the transfer… settlement occurs.
It can be related to the mortgage in that it is very common for the bank to add one twelfth of the annual property taxes and annual homeowners insurance premium each month to the regular mortgage paymentand keep that money in a separate escrow account. The bank then pays the property tax and homeowners insurance when due out of this escrow account, making payments directly to the local goverment or the homeowner’s insurance company as appropriate.
Mortgage insurance is indeed a separate thing. It was possible (at least in the past) to get the PMI payment removed once the mortgage was paid down to the point where the loan was only about 80% of the value of the house, although this may have changed.
Did a littler math.
Assume a $60,000 mortgage
36 monthly payments of $1000
$200 went for taxes and or insurance leaving $800 to mortgage.
6% interest.
After 3 years you still owe $43,331.
Buyer pays $75,000
$43,331 goes to bank,
$4500 goes to agent
Leaving $30,169. any other expenses will be deducted and the rest sent to you.
Not, apparently, in WI. Both properties I’ve owned I’ve had PMI included in the mortgage payment but homeowner insurance is on your own and paid directly to the insurer.
My current mortgage does not have an escrow account for things like property taxes and insurance.
It depends on the policies and practices of your lender. I have both property taxes and homeowners insurance collected with my mortgage payment and paid out of escrow by the lender. I know it’s done both ways and varies by lender.
And in Illinois, once you have your mortgage down to 65% with timely payments, you don’t have to have property taxes in escrow, either. Cite.
I’ve never had it that way. I pay the taxes and insurance myself. For one house I escrowed my taxes, but stopped that when I saw my name in the paper for delinquent taxes. The mortgage company was making more by keeping my money and paying the late fee penalty, but I still didn’t care to be late with my taxes.
I have never been given the option of escrowing the insurance, and doubt that I would do it, anyway.
My first home had an escrow account.
But every mortgage since then I have not had any escrow account. It has been my choice.
This is still the case, at least for our mortgage. The lender wants a recent appraisal and a bunch of forms, though. Property values in our neighborhood are all over the place, so I don’t want to shell out a few hundred bucks for an appraisal until I’m reasonably confident that we’ve reached 20% equity and/or have cash on hand to make up the difference.
I’ve never been given the option of escrowing the insurance either, the banks forced me to do it in all of my mortgage agreements 
I understand it actually. Than banks wanted to insure (get it, insure) that their investments were secured the best way possible. They don’t want the house to be uninsured, burn down in month two, and then you have no way to make good on the loan. They are just making sure that you are protecting the asset that secured the loan.
Before this thread, I thought that was the standard way things worked. It did in Connecticut, Pennsylvania and Virginia where I bought homes.
Ditto here, too. Reading some of the other comments it looks like it may vary by state/jurisdiction and maybe by bank. I’ve always paid my own property taxes and homeowner’s insurance. The bank merely requires that you prove you have insurance. If the insurance lapses for non-payment or any other reason the insurance company will just notify the bank who can take appropriate action. It’s no different than the requirement to have insurance on a car that the bank has loaned you money for.
To muddy the waters further, here in Canada, we have the CMHC (Canadian Mortgage and Housing Corporation) that forces everyone who is paying less than 20% down on their house to pay for a lump sum of mortgage loan insurance that is rolled into your mortgage, and then you hold house insurance that you pay for separately on top of that.
Edit: I realized that using the word “forces” is loaded; it actually is a good thing which reduces our exposure to economic collapse due to people buying houses they can’t afford.
I know at one bank where I had a mortgage, if they did not receive the notice from your insurance company that you had paid your insurance premium, they would send a letter telling you that you had until midnight of the day that the insurance was due to pay it, or they would provide you with a policy and stick the premium on your mortgage. And the premium would be much more expensive than you would have paid yourself to your own insurance company, plus it would only cover what they needed to protect their investment. Your furniture burned up? Your jewelry? Your clothing? Too bad. Not covered.
And don’t forget that any money you do earn from the sale is subject to US taxes on unearned income. Which can be a bundle, depending on your tax bracket.
This is rarely any issue for anyone. There’s the generous exemption, plus you could deduct improvements. Unless you are in the flipping business and doing it frequently, you are using the house as a primary residence for at least a couple years. And, well, if you really manage to make half a million dollars on the sale of your primary house, the taxes would be a trivial amount.
I have had a number of mortgages and I have never had insurance or property taxes taken out. I chose not to have an escrow mortgage which most people can do.
You can call your lender’s toll-free number and request a payoff amount instead of going through all kinds of machinations. You press a few keys on your phone, and you get your answer.