When you get a mortgage, you may be required to have an escrow account, depending on the type of loan you apply for. An escrow account is managed by your mortgage lender or servicer and is used to hold money for your property taxes and homeowners’ insurance. But even if it’s not required as a condition of your loan, you may want to request one anyway. Here’s why.
1. It’s predictable. When you have an escrow account, the company servicing your mortgage divides your annual homeowners’ insurance premium and property tax bill into 12 equal installments. This amount gets added to your monthly mortgage payments. You pay the same amount each month, and you don’t get surprised with a big tax or insurance bill each year.
2. It’s one less thing to worry about. Every year, when your insurance and tax bills are due, your lender or mortgage servicer pays them on your behalf with the money from your escrow account. You don’t have to save separately throughout the year to cover these expenses, cut a separate check to pay them or keep track of when these bills are due. Your mortgage lender or servicer takes care of it for you.
3. Payments get adjusted automatically. Property taxes and homeowners’ insurance premiums may vary from year to year. Your lender or mortgage servicer will automatically adjust the amount you contribute to your escrow account as necessary. If there’s an overage in your account, you’ll get a refund. If there’s not enough money to pay your taxes and insurance, they’ll typically cover the shortfall. Then increase your payments going forward to make up the difference.
If you’re ready to find your next mortgage—with or without escrow—Homeowners Financial Group can help. Give us a call and one of our Licensed Mortgage Professionals can review your options with you, so you can choose the product that’s right for you.