because we don't have a state income tax here in texas, our property taxes are relatively high -- on the order of about 2% or more of the assessed value of the home. so, for a while, i had been escrowing that, so it was included in our monthly mortgage payment. a few years back, i thought that there was clear benefit to holding that myself. our annual property taxes are around $12,000, so i figured that i could earn some interest on that money before i had to pay it out.
mathematically, it all works out, i even set aside an estimated amount at the beginning of the year so that i won't be caught off guard. but with interest rates these days, that amounted to little more than $10 this year! i'm going to shop around a bit for a better rate, but even if i find something that pays 1%, which at a glance seems like it would be doable, that would only amount to $100.
emotionally, there are a couple of factors at play. one, it's a bit painful to write that check every year, even though the money has been set aside. two, around about june, long after the pain of writing that big check has worn off, i get a exaggerated sense of wealth, because that money is sitting around. i know it doesn't make sense, but that's the truth of the matter.
from a purely mathematical standpoint, i still don't like escrowing, but there are clearly some advantages to it. and, every once in a while, you can benefit from it, as banks will do an escrow analysis only every once in a while, you can actually have less in your escrow account than what is needed to pay your taxes. this essentially amonuts to a 0% loan from the bank. of course, the opposite is also true, so it probably balances out.
for now, i'm still going to stick with my non-escrow plan, i feel that it gives me a bit for flexibility, but definitely something to think about.