Escrow and how it works.
You bought a house, which means you now have other important bills like home insurance and taxes to pay. Ready to say “hello” to escrow?
Instead of letting bills build up over the year, an escrow account allows you to pay a portion of your estimated annual taxes and insurance every month, as part of your mortgage payment.
And in the end, everything gets paid in full, on time.
Check it out.
Escrow pays bills. There are four major bill payments collected in an escrow account — annual property taxes; homeowner’s insurance; mortgage insurance (PMI); and flood insurance, if you have it.
Escrow helps you. No late or partial bill payments. An escrow account ensures your home-related bills are paid in full, on time. Plus, you won’t be hit by large bills come tax time. Think of an escrow account like a savings account— you pay into it throughout the year so you can make those large, year-end payments. Pretty cool, right?
Some lenders require an escrow account. To a bank, your home is collateral until your loan is paid in full. Banks want to make sure their investment (your property) is insured and the taxes are paid, so they collect these funds as part of your mortgage payment and place them in your escrow account. It’s a win, win for you and your lender.
Something to note. Homeowner’s insurance premiums and property taxes are subject to change and adjust over time, so your escrow payments could change throughout the year. Just like when you file your taxes, at the end of the year, you will see if you have an overage or short in your escrow account. With an overage, you will be refunded the difference and with a shortage, you will have to either make up the difference in one payment, or by increasing your escrow payments.
Ready to get started with your escrow account? Ask your Lower mortgage advisor how to get one set up!