What is an escrow account?
An escrow account is set up with the mutual agreement between a Mortgagee and Mortgagor. A prescribed amount of money is deposited in this account each time the Mortgagor makes a payment. This money is used to pay for property taxes and insurance. Essentially this amount belongs to the Borrower / Mortgagor, where the company where the escrow is held could be responsible to pay for taxes and insurance on the Borrower’s behalf from the accumulated funds in this escrow account.
An escrow account is used to collect and hold funds to pay your property taxes, homeowners insurance premiums or other charges when they become due. The account is often established for you by your mortgage company when you take out your mortgage. However, if an escrow account was not set up when you took out your mortgage, you may be able to do so now. Real estate taxes and insurance premiums must be paid regularly — typically, payments are due once or twice a year — and failure to pay these bills on time may cost you money in tax penalties or result in cancellation of your insurance coverage.
An escrow account (also known as an impound account) is an account established to help borrowers pay property taxes and insurance premiums for your mortgaged property. Deposits are made to the escrow account through monthly payments made in addition to the principal and interest amounts due. Note that payments of supplemental tax bills may not be paid from your escrow account. Please pay any supplemental tax bills directly to the taxing authority. You should not confuse this type of escrow account with the escrow account for loan closing that may have been established by you and the Seller when you purchased your home.
As part of your loan payment, you may deposit funds into an escrow account each month. The funds in this account are to be used to pay future bills such as real estate tax bills (excluding supplemental tax bills), property insurance premiums, flood insurance premiums (if applicable), and Private mortgage insurance premiums (If applicable) which are described in your mortgage contract. Escrow accounts enable us to pay these bills when they become due. This type of account is sometimes known as an “impound account”. Note: Homeowner association dues are not an escrow item and are the responsibility of the borrower. Payment should be made timely to avoid any risk in ownership change due to the unpaid dues.
An escrow account, also known as an impound account, contains funds collected from you for payment of property taxes, homeowner’s insurance, mortgage insurance and other property expenses as outlined in the mortgage agreement. If an escrow account is required for your mortgage loan, your monthly mortgage payment will include an amount necessary to pay for these escrow items.
