On rentals, do you pay escrow shortage or let payment increase

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On rentals, do you pay escrow shortage or let payment increase

Atul Mohlajee
Oak Park, IL · Member since 2014 · 285 posts · 114 votes

I have two commercial and residential properties.  Bank is asking to make up escrow shortage by paying about $11,600 or they will increase total monthly payment on both properties to make up for past and future escrow shortage that includes taxes and insurance.  What do most of you prefer, just let the payments increase and reduce cash flow or pay them interest free $11600 that I can otherwise use to pay off higher interest loans.  Please share your thoughts.

Thanks

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  • Atul Mohlajee
    OP
    Oak Park, IL · Member since 2014 · 285 posts · 114 votes
    7y

    Please respond and share your wisdom/ thoughts especially guys/girls with large RE portfolios.

    Thanks.

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  • Stanley Bronstein
    Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
    7y

    @Atul Mohlajee If you actually use that cash to pay down your loans with a higher interest rate, you will make money on the difference.

    Is the lender charging you interest on the monthly escrow payment increase?

    If not you would essentially be making money on the difference by just letting your payment increase.

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  • Atul Mohlajee
    OP
    Oak Park, IL · Member since 2014 · 285 posts · 114 votes
    7y

    The lender is not charging me any interest on escrow.  I would rather pay off $10000 loan on a credit card which is at 15%.

    Higher cash flow is only psychological but actual savings are interest savings.  Thanks for your input.  

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