What is an escrow account?
The term Escrow Account is by definiition a reserve account maintained by the lender where the borrower’s amounts over and above the prinicpal and interest payments are held until property related expenses are incurred. This account is used to pay property related expenses including county property taxes and homeowner’s insurance premiums.
An escrow account is a type of forced savings account that is made up of a portion of your monthly mortgage payment to pay for expenses such as property taxes, mortgage insurance (if applicable) and homeowner’s insurance premiums. An escrow account is typical of any mortgage lender you’ll deal with.
An escrow account is an account that may be required by the loan provider when you opt for a cash-out refinance debt consolidation loan. Your property taxes and homeowners insurance (if applicable) are paid out of this account when they become due. You pay into the account monthly with your mortgage payment. Q. What are “impounds”? A. Another word for escrow, impounds are the part of your monthly house payment that cover property taxes and home owners insurance (if required). This monthly amount is calculated by taking your annual payment/premiums and dividing by 12. As described above, for a higher rate you might be allowed to pay insurance and taxes by yourself. However, the general prefer practice is to collect these in monthly installments and pay them when due. This ensures that these are paid on time and prevents tax liens or lapsing of insurance.
An escrow account is established at the time you close your mortgage loan. This account is held by the lender for future payments as they become due of recurring items relating to the mortgaged property such as real estate taxes and insurance premiums. Lenders usually require you to pay an initial amount for each of those items to start the reserve account at the time of closing. Once your mortgage is paid in full, you are still responsible for paying taxes and hazard insurance.
An escrow account is typically established at the time you close your mortgage loan. This account is held by the lender for the future payments of recurring items relating to the mortgaged property, such as real estate taxes and insurance premiums (hazard and mortgage), as they become due. Lenders usually require you to pay an initial amount for each of those items to start the reserve account at the time of closing. You are not required to have an escrow account. You always have the option of paying your own property taxes and home owners insurance thereby reducing the amount of money you would need to pay at your time of closing. In Arizona, most lenders charge a fee to waive these escrow accounts.
