What are escrow payments?
Escrow payments are set up so that you do not have to pay your real estate taxes or homeowner’s insurance on your own. It is an effective way to budget as both are otherwise collected in lump sums (taxes are paid twice a year and insurance once a year) and the escrow payment allows you to pay gradually (monthly) into an account that the lender manages. The lender then will pay both for you when they are due. Many lenders incent borrowers to escrow their tax and insurance payments by offering slightly better interest rates.
