When you purchase a home in Westchester County, your monthly mortgage payment typically includes more than just principal and interest. Many lenders also collect money each month for your property taxes and homeowners insurance, holding those funds in what’s known as an escrow account.
But is that always the best option? Some homeowners prefer to handle these payments themselves — paying taxes directly to their town and renewing their insurance policy independently.
Both approaches have benefits and drawbacks, and the right choice can depend on your financial habits, comfort level with budgeting, and how much control you prefer over your money. Below, we break down the pros and cons of using an escrow account versus paying taxes and insurance directly, with examples tailored to homeowners across Chappaqua, Armonk, and other parts of Westchester Real Estate.
What Is an Escrow Account?
An escrow account is a special account managed by your mortgage lender or loan servicer. Each month, a portion of your mortgage payment goes into this account to cover future bills for property taxes and homeowners insurance.
When those bills come due — often semiannually for taxes and annually for insurance — your lender pays them on your behalf using the money that’s accumulated in escrow.
Escrow accounts are especially common among first-time homebuyers or those with smaller down payments because lenders like the added security of knowing these essential bills will be paid on time.
Paying Property Taxes and Insurance Directly
If you don’t use an escrow account, you’ll be responsible for paying your Town or County tax bills and your insurance premiums directly.
That means you’ll receive a bill from the Town of New Castle (for example, if you live in Chappaqua), and you’ll need to set aside funds to pay it — typically twice per year. You’ll also renew your homeowners insurance policy annually with your chosen provider.
Some lenders allow borrowers to waive escrow once they’ve built up sufficient equity — often 20% or more — or if they meet certain credit score requirements.
Pros and Cons of Using an Escrow Account
✅ Pros
1. Convenience and Simplicity
Your lender handles all the logistics — you make one payment each month, and they take care of the rest. This reduces the chance of missing due dates or incurring late fees on Westchester property taxes, which can be steep.
2. Built-In Budgeting
Escrow helps homeowners spread large annual or semiannual expenses into predictable monthly installments. Instead of coming up with thousands of dollars twice a year, you make manageable monthly contributions.
3. No Surprise Tax or Insurance Increases
If your tax assessment goes up — which happens often in Westchester — or your insurance premium changes, the lender adjusts your escrow amount automatically, keeping you current.
4. Lender Peace of Mind (and Sometimes Better Rates)
Because lenders view escrowed loans as lower risk, some offer slightly better interest rates or more favorable loan terms to borrowers who maintain escrow accounts.
❌ Cons
1. Less Control Over Your Money
The lender holds your funds — not you. If you prefer to manage your own finances, it can be frustrating knowing your money sits in a non-interest-bearing account for months before being used.
2. Escrow Shortages or Overages
If your property taxes or insurance rise, your escrow may not have enough funds to cover the increase. Lenders then require you to make up the difference — sometimes with an unexpected lump-sum payment.
Conversely, if you’ve overpaid, your refund may take time to arrive.
3. Inaccurate Estimates
Lenders base escrow estimates on prior year bills. If Westchester County reassesses your home or your insurance premium changes dramatically, you could see a sudden jump in your monthly payment.
4. Lack of Flexibility
Some homeowners like to shop around for new insurance annually or switch providers. When your policy is paid through escrow, changing carriers or timing renewals can become more cumbersome.
Pros and Cons of Paying Taxes and Insurance Directly
✅ Pros
1. Total Financial Control
You decide when to pay your bills, and you keep your money until it’s actually needed. For homeowners who prefer managing cash flow or taking advantage of short-term investments, this can be appealing.
2. Opportunity to Earn Interest
Instead of letting your lender hold your money, you can keep it in a high-yield savings account, earning some interest until your bills are due — especially useful when property taxes in Chappaqua can run into the tens of thousands.
3. Easier to Shop for Better Insurance
If you’re not tied to an escrow cycle, you can more easily compare rates and switch carriers mid-year to find the best deal.
❌ Cons
1. Budgeting Discipline Required
Paying directly requires discipline and careful planning. You’ll need to set aside money monthly so that when your tax or insurance bill arrives, you’re prepared to pay it in full.
2. Risk of Missing Payments
If you forget or misplace a bill — especially during busy tax periods — you could incur late fees or even risk a lien on your property. Westchester towns don’t offer much leniency for late payments.
3. Lender May Charge a Premium
Some mortgage lenders add a small fee or slightly higher interest rate for borrowers who waive escrow accounts since it increases their administrative risk.
Which Option Is Right for You?
The choice often depends on your financial personality and comfort level with managing large recurring expenses.
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If you value simplicity and predictability, an escrow account is likely best. It ensures your taxes and insurance are always paid on time and removes the burden of remembering due dates.
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If you prefer control and flexibility, and you’re confident in your budgeting habits, paying directly can make more sense — especially if you like to maximize interest on your funds or regularly reassess insurance options.
For many homeowners in Westchester County, the escrow setup at closing becomes the default and stays that way for years. But it’s worth periodically reviewing your mortgage terms — especially after refinancing or a change in property value — to see whether maintaining escrow continues to serve your needs.
Local Considerations in Westchester County
Property taxes in Westchester are among the highest in the country, and the Town of New Castle (Chappaqua) alone has multiple billing cycles:
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School taxes are typically due in September and January.
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Town and county taxes are usually billed in April.
Because of these complexities, many lenders strongly prefer escrow accounts to avoid missed payments.
However, homeowners who’ve built significant equity — or who’ve recently refinanced — may now have the option to opt out of escrow and manage these payments independently.
If you’re unsure, talk to your lender or financial advisor, or reach out to a local real estate expert familiar with Westchester property taxes and escrow structures to help evaluate your options.
Final Thoughts
There’s no one-size-fits-all answer when deciding between an escrow account and paying taxes and insurance directly. Both offer advantages — and each comes with trade-offs.
The key is understanding how each approach aligns with your financial goals and comfort level.
For many Westchester Real Estate owners, escrow brings peace of mind and consistency. For others, independence and financial control outweigh convenience.
If you’re buying or refinancing a home in Chappaqua, Armonk, Pleasantville, or anywhere in Westchester County, the team at NestEdge Realty can help you navigate these choices — ensuring your financing and payment structure fit seamlessly into your broader homeownership plan.
